Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Oral Answers to Questions — TRANSPORT

Rail Investment

Mr. Gregory: asked the Secretary of State for Transport how many major investment applications by British Rail he has approved over the past year.

The Secretary of State for Transport (Mr. Nicholas Ridley): Since 2 December last year we have approved seven major investment applications worth £272 million in all.

Mr. Gregory: I congratulate my right hon. Friend on that impressive record, which clearly gives the lie to Opposition parties who suggest that we are not investing in the infrastructure. Has my right hon. Friend refused any applications during the period under consideration?

Mr. Ridley: I am grateful to my hon. Friend for those remarks and I agree that British Rail is going through a high-level investment period, with beneficial results. I have not refused any schemes that BR has put forward, but two schemes—the Bournemouth-Weymouth electrification and the Stansted airport rail link—are still under consideration.

Mrs. Beckett: Will the Secretary of State tell the work force and management of British Rail Engineering Ltd. how they can sensibly plan to fall in line with these

investment decisions when they can beat the competition hollow yet still see that competition win the contracts that BREL should have?

Mr. Ridley: The winner of any competitive bid is decided by British Rail, and the hon. Lady should address her inquiries to BR. I do not see any harm in keen competition developing to supply the railways. It means that we shall get better and cheaper stock.

Mr. Adley: While perhaps sharing with the hon. Member for Derby, South (Mrs. Beckett) the view that the railways face unfair criticism in terms of safety and in some other respects, is it not a fact that my right hon. Friend's record on rail investment is impeccable? Indeed, is it not a fact that that record is the best of any Government for the past 20 years? Will he continue to keep me happy by giving an early yes to British Rail about the Dorset electrification to which he referred?

Mr. Ridley: I hope that my hon. Friend will feel that my record is impeccable on all transport matters. I am delighted to accept that the Government have endorsed a high level of investment in BR. I shall not be able to give my hon. Friend an answer about Bournemouth-Weymouth until the studies have been completed.

Mr. Madden: While I am in agreement with and welcome the electrification of the east coast main line, does the Secretary of State appreciate the widespread concern in Bradford about the refusal so far to electrify the line between Bradford and Leeds? Will he consider meeting representatives of Bradford city council on the matter? Will he read the report recently published by the city council and British Rail and sympathetically consider the proposal? Is he aware that if it does not proceed the efforts of the city to overcome the unemployment and economic crises facing it will be that much harder?

Mr. Ridley: The hon. Gentleman knows that either I or another Minister will always meet hon. Members who wish to see us. Investment in the railways is decided not by political pressure but by whether the investment makes good sense in terms of the return that is likely from it.

Mr. Coombs: Will my right hon. Friend explain why this investment has meant the inevitable closure of the


Swindon railway works in my constituency—[Interruption.] For the benefit of Opposition Members who still fail to understand the point, will he confirm that even if all the investment to which he referred had been awarded in the form of contracts to BREL, it would still not have made any difference to the Swindon works?

Mr. Ridley: I am happy to tell my hon. Friend that there are growing signs that British Rail Engineering Limited is likely to begin obtaining substantial orders overseas. It has already obtained some. I think that there is still much business to be hoped for. It should be able to compete for and win orders in world markets as well as in domestic markets. A high level of investment in British Rail has the effect of reducing the need for maintenance and repair, because the new stock is better built, lasts longer and requires less maintenance. Indeed, that is why some of BREL's workshops have had to be slimmed down or closed. The higher the level of investment in the railways, the more that has tended to happen.

Mr. Snape: Will the Secretary of State accept that the recently announced British Rail fare increase of between 8 and 10 per cent. is higher than the rate of inflation, that the workers at Swindon and York could well be employed in building rolling stock for BREL and thereby improve the quality of cross-country rail travel, and that, instead of listening to some of his Back Benchers, who are more anxious to curry favour than to defend the interests of their constituents, he should talk to regular passengers, who are fed up to the teeth with paying higher fares for a declining service?

Mr. Ridley: I do not quite know what the hon. Gentleman can mean by that, since BREL has already won orders to build 170 DMUs and 184 EMUs, and the amount of work at York is certain to keep the staff occupied for at least two years.
There is no question but that the Government's high investment policy is providing jobs for newbuild in BREL, but, as the hon. Gentleman seems to be completely incapable of understanding, the result is that there is less repair and maintenance work, such as was carried out at Swindon.

Mr. Pawsey: Is my right hon. Friend able to say how much of the £272 million is being spent on rolling stock, particularly passenger rolling stock? Could he also say how much of that investment is likely to find itself on the London Midland region?

Mr. Ridley: In reply to my hon. Friend's first question, in the past 18 months, £590 million has been spent by British Rail on investment. Nearly half, £272 million, was devoted to passenger rolling stock. I cannot give details of stock to be used on the line that my hon. Friend mentioned, but I will ask the chairman to give my hon. Friend the information that he seeks.

British Rail Catering

Mr. Boyes: asked the Secretary of State for Transport if, when he next meets the chairman of British Rail, he will raise with him the subject of British Rail catering.

The Parliamentary Under-Secretary of State for Transport (Mr. David Mitchell): No, Sir. Railway catering is a matter of management for the British Railways Board.

Mr. Boyes: If the Minister finds an opportunity to meet the chairman and to discuss catering, will he pass on my praise for the courteous and caring way in which British Rail catering staff serve the public, often in difficult circumstances, when they have to solve problems that are not of their creation?
Although I do not generally talk about individuals, Alec Gibb and his crew served the 7 am Durham to London train exceptionally well for many years. Now that they have moved to another line, I am taking the opportunity to thank them, and it cannot be suggested that I am currying any favours.

Mr. Mitchell: I am delighted to hear the hon. Gentleman's praise for British Rail catering staff. I shall pass on his comments to the chairman. From my experience, in many cases praise is very well deserved.

Sir Anthony Meyer: Is my hon. Friend aware that, despite the admitted courtesy and helpfulness of the staff, the standard of catering on British Rail seems to be going steadily downhill? Is this not an area in which privatisation should be encouraged as quickly as possible?

Mr. Mitchell: I assure my hon. Friend that we have asked the chairman of British Rail to obtain more supply and support services from the private sector, including train and station catering.

Mr. Stephen Ross: The last time I was in north Wales the catering was supplied by private caterers who joined the train at Chester. While I agree that the catering has greatly improved, it would be a joy if travellers on British Rail, who are paying huge fares, could get into clean carriages from which all the rubbish, cups and saucers had been removed.

Mr. Mitchell: I travel regularly on British Rail, and I am pleased at the speed with which the staff come in with bags to remove rubbish when the trains arrive at terminus stations. I am sorry that the hon. Gentleman has had an experience that has not given satisfaction. Other people have praised the private catering services provided on the Welsh line, and I am grateful to the hon. Gentleman for drawing attention to that. I shall pass that comment on to the chairman, as it may encourage British Rail to introduce more private operations.

Light Dues

Mr. Colvin: asked the Secretary of State for Transport what representations he has received following publication of the Arthur Anderson report on light dues.

Mr. Ridley: I have received a large number of comments from individuals and from representative bodies. I am most grateful to all concerned for the thought and attention that they have given to the proposals. I am considering the issues carefully and I shall make a further statement in due course.

Mr. Colvin: Is my right hon. Friend aware that the cost of collecting light dues from sea-going yachts will probably be greater than the revenue raised? Does he know of any EEC country that charges such dues and, if not, will Britain be the odd man out? How will my right hon. Friend overcome the difficulty of defining a sea-going yacht?

Mr. Ridley: The cost of administering and enforcing any charge on yachts will depend largely on what measures


the Government decide to take. I have not reached any conclusions on that. I appreciate the problem of the definition of a sea-going yacht, but, again, I have not reached any conclusion. I can tell my hon. Friend, however, that the Republic of Ireland and Greece both charge light dues on shipping.

Inter-city Services

Dr. Marek: asked the Secretary of State for Transport if, when he next meets the chairman of British Rail, he will raise the provision of fast non-stop services between the cities of Great Britain.

Mr. David Mitchell: The pattern of services on the inter-city rail network is a matter for the British Railways Board.

Dr. Marek: Does the Minister agree that the level of services on Inter-city provided by British Rail is appallingly low? On the west coast main line, on which I have been travelling for the whole of the year, I cannot remember one occasion when everything was right; for example, the train was late, the engine failed, the train was overcrowded so that there was standing room only, or there was no restaurant service. Does the Minister accept that that is a matter which goes beyond the day-to-day control of normal Inter-city services provided by the management? What will the Minister do about it?

Mr. Mitchell: I am sorry that the hon. Gentleman's experiences have been much less satisfactory than my own. The matters that he raises are for the chairman of British Rail, to whom we have given objectives to provide an efficient railway service that is reliable, attractive and punctual.

Mr. Cash: Does my hon. Friend accept that the British public are increasingly fed up with the exceedingly nasty apple pies served on these trains? Will he do what he can to privatise the services and get rid of the current monopoly?

Mr. Mitchell: I have said already that we are inviting British Rail to obtain more of its services from the private sector. Twice in the past week when I have travelled by British Rail the buffet car has closed one hour before arrival at our destination, so I share the hon. Gentleman's sense of unease and am aware of the advantages to be obtained from private sector operations.

Mr. Flannery: I should like to reiterate the complaints made by my hon. Friend the Member for Wrexham (Dr. Marek) about the St. Pancras line. I am often asked by the Minster why I continually complain. It is because he does nothing about it. The reality is that although the individual train is faster, there are fewer of them, fewer carriages, they are regularly overcrowded, and from Sheffield the train often stops at Chesterfield, Alfreton, Nottingham, Leicester, Kettering, Luton and then London. That adds half an hour to the journey, which is added throughout the day. The trains are slower than they used to be when they ran hourly.

Mr. Mitchell: Those are entirely matters for the management of British Rail. It is the job of Ministers to set objectives for the board. It is for the board to carry them out. If the hon. Gentleman has complaints about the way in which the board is carrying them out, he should address them to the chairman.

Driving Tests

Mr. Holt: asked the Secretary of State for Transport if he has any plans to modify current driving test standards; and if he will make a statement.

The Parliamentary Under-Secretary of State for Transport (Mr. Michael Spicer): There are no such plans at present.

Mr. Holt: Is my hon. Friend aware that anyone can take a set of driving lessons, pass the driving test without ever having been allowed to drive on a motorway, and thereafter get into the fastest car, go as fast as possible, tow a caravan or a horse box with a couple of horses in it and create mayhem, at night and in the dark? Is it not time that the Ministry took on board the need for training those who will travel on motorways and the need to make motorway driving an integral part of the driving test so that we can lower the carnage on our roads?

Mr. Spicer: The problem with allowing L-drivers on motorways in preparation for a test, as my hon. Friend suggests, is that it would increase the hazard to the other drivers already using the motorways, who are in the majority.

Mr. Higgins: Is my hon. Friend aware that some motoring schools appear to be giving the impression that they can get a driving test arranged at an earlier date than would normally be the case for a private individual applying for a test? Is that true either for the first allocation of a date for cancellations?

Mr. Spicer: I am not aware of the point mentioned by my right hon. Friend, but perhaps he will let me have the details afterwards. I am aware that the waiting lists have increased unacceptably. Our priority is therefore to employ additional examiners to reduce the waiting lists.

Mr. Amess: asked the Secretary of State for Transport how many residents of Basildon took a driving test in each of the last five years.

Mr. Michael Spicer: I regret that records of driving test applicants are not kept by their places of residence, and therefore that information is not available.

Mr. Amess: In view of the very large number of my constituents taking driving tests and the considerable distances that they have to travel to the nearest test centres, does my hon. Friend understand my constituents' desire to have their own driving test centre in Basildon, now the most dynamic town in the south of England?

Mr. Spicer: I understand that my hon. Friend has been assiduous in making that case on behalf of his constituents, but driving test centres are carefully selected to ensure that test routes around them are not too easy, and we feel that driving conditions in Basildon are not sufficiently difficult. As my hon. Friend knows, there are four centres within 13 miles of Basildon.

Motorways (Fog Warnings)

Mr. Stephen Ross: asked the Secretary of State for Transport whether he will consider installing closed circuit television cover in fog prone sections of motorways, linked to more prominent warning signals.

Mr. Ridley: I have no plans to extend television surveillance to deal specifically with fog-prone locations.

Mr. Ross: Does the Secretary of State agree that there have been some tragic accidents in fog on our motorways in the past month or two, including one in the last couple of weeks? It is not time to experiment with more sophisticated closed circuit television systems, which I believe are available, or fog-sensing devices?

Mr. Ridley: I do not think that television is the answer because television cannot see fog in the dark for a start, and that seems to be a fundamental defect. I would even go so far as to say that the motorist is more likely to see the fog than are television cameras. However, we are installing experimental fog detectors. Some have been installed on the Mole valley section of the M25 to see whether they can detect fog in all conditions to alert the police, so that they can illuminate the speed restriction signs.

Mr. Roger King: Is my right hon. Friend prepared to look further at the installation of closed circuit television and advance warning signs, not just to combat fog but to control the increasingly dense traffic flows on the southern part of the M1, where the present signalling system is wholly inadequate?

Mr. Ridley: When high traffic flows result in regular congestion or queues, and where we have complex motorway interchanges, we instal closed circuit televison. That is the right use of it, not for fog.

Mr. Stott: In the absence of my hon. Friend the Member for Ealing, Southall (Mr. Bidwell), who tabled a question about speed limits, is the Secretary of State aware that one of the great problems on our motorways is people who drive at excessive speeds in fog? Is he aware, further, that on Saturday I was on the M1 between Leeds and Sheffield and that some drivers passed me exceeding 70 mph, without lights? Would it have been in order for me to take their numbers and report them to the police?

Mr. Ridley: I have never before been asked a technical and legal question as a Front Bench supplementary question to a question which has not been asked because the hon. Member who tabled it was not present. I agree strongly with the hon. Gentleman that the real problem on our motorways, and our roads in general, is that people drive too fast for the prevailing conditions. There is no subsitute for impressing on people the need for a higher standard of driving, which includes controlling their speed, not just to the limit, but to the conditions. I do not think that the hon. Gentleman would be able to substantiate as evidence numbers which he took down while driving at 70 mph down a motorway last Saturday afternoon.

Mr. Maclean: Perhaps I could help my right hon. Friend. Does he agree that the answer to the problem lies not in new technology but in cracking down hard on the murderous maniacs who drive too fast in fog without proper warning lights? Will he encourage the police to prosecute on all occasions when they come across such dangerous lunacy on the motorways?

Mr. Ridley: I am sure my hon. Friend is aware that enforcement by the police of the speed limit and driving laws is entirely a matter for them. However, I agree strongly that we would have a better safety record and fewer crashes on our motorways and roads if people drove more carefully and considerately.

Severn Crossing

Mr. Roy Hughes: asked the Secretary of State for Transport if he will give details of the progress made in the feasibility study about the proposal to construct a second Severn crossing.

Mr. David Mitchell: The consultants are continuing their examination of the details of the various options for a second crossing in two corridors south of the existing crossing. They are determining optimum locations for a bridge, a driven tunnel and an immersed tube tunnel, and their links with the motorway network. They are also carrying out engineering, environmental, traffic and economic assessments. They have made good progress, and expect to complete their studies by the target date of August 1986.

Mr. Hughes: Will the Minister say whether he has any plans to authorise the building of a second Severn crossing with private capital? If so, by how much would the tolls be likely to increase, and for how long would they be operated?

Mr. Mitchell: No decision has yet been taken to build a second crossing, so the second point does not arise. However, if we proceed with a second crossing, we shall certainly consider the hon. Gentleman's point.

Mr. Grist: Does my hon. Friend accept that that answer will cause some alarm in south Wales? There should be an undertaking to build a second crossing before the turn of the century. Why are the consultants not considering the Wimpey proposal for a barrage, with associated power generation?

Mr. Mitchell: The barrage is a separate matter. Any decision about when and whether to build an additional crossing of the Severn will be taken in the light of studies which are being made of traffic forecasts, and of the necessity to strengthen the existing crossing.

Mr. Anderson: Is the Minister aware that if what independent forecasters tell us about likely congestion is correct, the decision will have to be made shortly after the date of publication of the report in the autumn? May I take it that the report will be made available to the House when it is published?

Mr. Mitchell: That is a different question. Perhaps I may write to the hon. Gentleman about it.

Mrs. Clwyd: In view of the continuing tailbacks on the Severn bridge— sometimes of several miles—and the fact that industrialists in Wales have said that this is affecting the Welsh economy, will the Minister consider abolishing the tolls?

Mr. Mitchell: There are no plans at present to abolish the tolls on that estuarial crossing.

Motorways (Lighting)

Mr. Peter Bruinvels: asked the Secretary of State for Transport, out of the allocation for the national road programme in the autumn statement, how much will be spent on lighting on motorways in 1986–87 and 1987–88, respectively.

Mr. Ridley: For 1986–87 the allocation of resources between the various elements of the national road programme has yet to be finalised. Details will be


published in the Supply Estimates. Future years' expenditure on lighting will be determined taking account of the available resources and competing priorities.
My Department's policy on the provision of lighting is currently under review. We are consulting on proposals which would require cost-benefit analysis and environmental assessment of each lighting scheme.

Mr Bruinvels: As joint chairman of the British parliamentary lighting group, I recognise that there is to be a review of motorway lighting, but does my right hon. Friend agree that having only 376 miles of motorway lit is not exactly good news, given that 1,300 miles are still unlit? Will he take note of the views of the Select Committee on Transport which said that lighting unlit stretches of our motorways would reduce night time accidents by 60 per cent.? Is that not the way forward?

Mr. Ridley: No one doubts my hon. Friend's credentials and his commitment to or extreme concern about motorway lighting. However, I am sure he will agree that we must have some form of cost benefit analysis to decide which stretches of road should be lit and which should not. There cannot just be a policy to light the whole of the motorway network. It must be done on a value for money basis, as is done in respect of other improvements to the road network in order to achieve road safety or to avoid congestion.

Mr. Bagier: Does the right hon. Gentleman agree that from a road safety aspect alone the lighting of the complete motorway system is highly desirable and ought to be provided for?

Mr. Ridley: No, I do not agree, because there are many other ways in which we can spend money to improve road safety, including the straightening of dangerous bends and junctions. One must make a value for money judgment about the best way to spend the available money, and that does not always mean the provision of lighting.

Small Businesses

Mr. Powley: asked the Secretary of State for Transport what new opportunities his Department has created for the development of new small businesses.

Mr. David Mitchell: The Transport Act 1985 has opened up the market for local bus services. British Rail has opened its supply and support services to competition from the private sector, and new business opportunities will be available to taxi operators.

Mr. Powley: I thank my hon. Friend for his informative reply. Will his Department publish the opportunities for bus and taxi companies and where those opportunities will be available? On behalf of small businesses and myself, I thank the Department for the steps that have been taken to improve access on the All up to Norwich.

Mr. Mitchell: I assure my hon. Friend that a series of leaflets will be issued to explain the new Act and the opportunities that it provides. The Department's traffic area officers will advise on how to apply for an operator's licence and how to register a local service. There will be an opportunity up to February for anyone to register a new bus service, and from about April onwards there will be opportunities for tendering for revenue supported operations from county and district councils.

Local Authority Airports

Mr. Patrick Thompson: asked the Secretary of State for Transport what representations he has received for local authorities concerning his proposal that local authority airports should become Companies Act companies.

Mr. Michael Spicer: I have had discussions with representatives of a number of local authority airports and with the Joint Airports Committee of Local Authorities and Aerodrome Owners Association. Both these bodies have also been invited to submit written comments.

Mr. Thompson: I thank my hon. Friend for that reply. Does he accept that when approving future airport companies—for example, in Norwich—it is vital that they should be responsive to small businesses and business generally in the area and that they should be free from any undue political interference?

Mr. Spicer: I confirm that under our present proposals Norwich airport will become a public limited company. I also confirm what my hon. Friend said. Our objective in turning airports, such as Norwich, into public limited companies is that they should be insulated from political interference and, as far as possible, operate as commercial undertakings.

Mr. McCrindle: Is it correct that Manchester international airport would be prepared to change to a public limited company subject to the board of directors' continuing to consist entirely of Manchester city councillors? If so, will my hon. Friend confirm that that does not conform with the idea laid down by the Government?

Mr. Spicer: I confirm that Manchester city has suggested how it might turn the airport into a public limited company. I also confirm that we are dissatisfied with a number of aspects of those proposals; in particular, those which try further to link the city with the airport.

Mr. Anderson: That matter must be seen in the general context of the Government's ideological views on privatisation. Can the Minister tell us of other comparable countries where the major airports are in private hands?

Mr. Spicer: There is no question but that this is a pace-setting venture, which is one reason why so many other countries are full of admiration for what the Government are doing.

Mr. Favell: Has my hon. Friend read the comments made by his right hon. Friend the Chancellor of the Duchy of Lancaster this weekend about Manchester city council? Can we rely upon my hon. Friend to ensure that the management of Manchester international airport, the region's most important asset, never falls into the hands of Manchester city council?

Mr. Spicer: The Government have no proposals to compel the privatisation of Manchester airport, but they are determined to set up a public limited company which will operate commercially and not be subject to political interference by the city.

Mr. Snape: Does the Minister accept that the proposal currently being considered by his Department is to set up a public limited company owned jointly by the Manchester city council and the passenger transport executive, not one


owned wholly by the city council? What representations have been received from airlines, airport users or passengers in Manchester complaining about the present position or the city council's proposals? Why is it necessary to deprive locally elected councillors, of any party, of a say in the future running of an airport into which public money has been ploughed over the years and which has been a credit to municipal enterprise?

Mr. Spicer: The Government's intention has been clearly set out. The local authorities have a choice as to whether they set up joint boards comprised of the districts or a passenger transport authority-based system. It is for the local authorities to decide. The Government say that that decision— which, in the case of Manchester, has been delayed—must be made quickly. If the decision is not made within the foreseeable future—that must mean by the end of this year—the Government will have to insist on a passenger transport authority-based system.
On the hon. Gentleman's general point, we are not convinced, and we suspect that some Labour-controlled authorities may not be convinced, that using taxpayers' and ratepayers' money to support and develop airports is the best way to spend that money. It is much better to allow private enterprise to do so, and a number of Socialist-controlled authorities believe that.

Local Transport (Grants)

Mr. Tony Lloyd: asked the Secretary of State for Transport when he last met representatives of the passenger transport executives to discuss the current and prospective level of Government grant for local transport.

Mr. David Mitchell: Rate support grant for the metropolitan counties and for the passenger transport authorities that will succeed them will depend on their grant-related expenditure assessments and on their actual expenditure. For the first three years, the new PTAs will be constrained by precept control under the Rates Act 1984, and I am currently considering the authorities' applications for redetermination of their expenditure levels. Other grants are available for public transport capital projects under section 56 of the Transport Act 1968.

Mr. Lloyd: Is the Minister aware that there is considerable concern in Greater Manchester that both the quality and the quantity of bus services will deteriorate as a result of cuts in the grants available to passenger transport executives and the effect of the Transport Act 1985? What specific guarantees can he give that that will not happen? What guarantees can he also give that the light rapid transport system will be allowed to go into operation?

Mr. Mitchell: We are waiting to see and consider all aspects of the light rapid transport system to ascertain whether it represents an economical and sensible use of resources.
With regard to fears about the deterioration of bus services in Manchester, I should have thought that, after the substantial arguments during the passage of the Transport Bill, the people of Manchester would by now have realised that the fears constantly peddled by public representatives in the area have no validity whatever. My right hon. Friend the Secretary of State has provided the full amounts necessary to allow existing concessionary

fares to continue. Advice on revenue support is based on expenditure falling into line with the Public Expenditure Survey Committee provision.

Oral Answers to Questions — ATTORNEY-GENERAL

PCW Syndicate

Mr. Stephen Ross: asked the Attorney-General, in the light of the findings of the disciplinary committee at Lloyd's in the Peter Cameron Webb syndicate case, what steps are being taken to prosecute those involved.

The Solicitor-General (Sir Patrick Mayhew): A strong fraud investigation group is vigorously engaged in seeking the required evidence, but any criminal prosecution must be founded on evidence that is both available and admissible in criminal proceedings in this country. Serious delay has been imposed by the location of certain evidence in a foreign jurisdiction. I hope that that difficulty can be overcome.

Mr. Ross: Is the Solicitor-General aware that at least two of my constituents have lost, or are likely to lose, as much as £200,000 due to the activities of Mr. Peter Cameron Webb and his associates? If it is possible for Lloyd's disciplinary committee to adjudicate on those people and to impose substantial fines and penalties, why is it not possible for the hon. and learned Gentleman's Department and the Director of Public Prosecutions to bring the guilty people before the courts?

The Solicitor-General: I naturally sympathise with all who have lost as a result of the transactions with which the investigations are concerned, but in order to bring proceedings to a successful conclusion in the criminal jurisdiction of this country evidence must be available not only in a form that is admissible in those proceedings but from witnesses who are prepared to attend. That is the distinction.

Mr. Stanbrook: In view of its success in this and other cases, is my hon. and learned Friend satisfied that the fraud investigation group has sufficient funds to continue its good work in these respects?

The Solicitor-General: I am grateful to my hon. Friend for his concern. When the group was set up, it was resourced on a basis sufficient for its expected work load. Those resources are now seriously stretched and are under review.

Mr. Merlyn Rees: Whether the fraud investigation squad is big enough and has the right resources is an important question, but can the Solicitor-General assure the House that Lloyd's is co-operating with the investigation group?

The Solicitor-General: Lloyd's is governed by its own legislation in the form of byelaws. The Director of Public Prosecutions is in renewed discussion with Lloyd's as to ways in which Lloyd's can make available transcripts of its disciplinary proceedings without infringing its obligations under its own legislation. The fact that the Police and Criminal Evidence Act comes into force in its material particulars on 1 January next year may well be helpful.

Mr. Dykes: In view of the significant answer given to my hon. Friend the Member for Orpington (Mr.


Stanbrook), will my hon. and learned Friend now reassure the House, as is logical in the light of what he has said, that the staff of this vital department will be increased to deal adequately with the growing number of fraud cases?

The Solicitor-General: My hon. Friend will know that the issue of resources does not rest exclusively with me. With his long experience in the House, he will appreciate where my hopes lie from the answer that I gave to my hon. Friend the Member for Orpington (Mr. Stanbrook).

Mr. Gould: Was the Solicitor-General implying in his answer to the hon. Member for Orpington (Mr. Stanbrook) that the Lloyd's byelaws somehow impinge upon the obligation of Lloyd's to disclose information that might be relevant to the commission of a criminal offence? If so, does he accept that that is a powerful reinforcement of the argument that Lloyd's cannot be allowed to remain in that position for much longer?

The Solicitor-General: I do not think that the conclusion to the hon. Gentleman's supplementary question is justified by the premise. As I understand it, there are difficulties about the power of Lloyd's to make available a transcript in circumstances in which criminal proceedings are not on foot. The hon. Gentleman will recall that the Director of Public Prosecutions may wish to see transcripts as an aid to his investigation, but he cannot as yet say that proceedings are on foot.

Mr. McCrindle: Has my hon. and learned Friend heard the proposition that even if there is a marginal risk that a prosecution might not succeed, it is sometimes considered to be of sufficient importance to justify some risk being taken?

The Solicitor-General: The DPP's critics are extremely versatile. The Director is criticised when a prosecution ends in an acquittal, on the basis that the evidence could never have been sufficient. He is also criticised for not venturing prosecutions, even though there is a less than 50 per cent. chance of conviction. The guidelines laid down by my right hon. and learned Friend the Attorney-General, a copy of which is deposited in the Library, make it clear that there should be a better than 50 per cent. chance. I believe that that is in the interests of justice.

Mr. Nicholas Brown: The Solicitor-General must be aware that 324 serious frauds were reported in the United Kingdom in 1983 and that only 37 led to prosecutions. Does he accept that the allocation of only 16 senior legal assistants to the new fraud investigation group in the Crown Prosecution Service to cover the entire United Kingdom is totally inadequate and will give the general public the impression that the only Act under which fraud will be prosecuted is the old pals' act?

The Solicitor-General: I think that the hon. Gentleman's joke deserved a better laugh than it received. There were 26 persons awaiting trial on indictment in November 1984 and there are 77 now. The principal assistant director drew attention to that in The Times last Saturday. That shows sufficiently the Director's determination to prosecute fraud whenever sufficient admissible evidence is available. It shows also that, with the resources presently available to him, he has been getting on with the job. As to whether he needs more resources, I have said to the House what I want to say.

Anglo-Irish Agreement

Mr. Adley: asked the Attorney-General whether he has yet had any discussions with his counterpart in the Eire Government since the signing of the Anglo-Irish Agreement.

The Solicitor-General: No, Sir.

Mr. Adley: Is my hon. and learned Friend aware that the two Governments have expressed the intention to intensify action against terrorism, which will be, and is, widely welcomed by sane, normal people, certainly in England, Scotland and Wales? Will he take a message from the House, and from most of our constituents, that he and his counterpart in the Government of the Irish Republic have our warm good wishes for success in their stated objectives?

The Solicitor-General: I am deeply grateful to my hon. Friend for what he has said. I believe that reassurance on the agreement between the two Governments will grow as its terms become more widely understood.

Mr. J. Enoch Powell: Is the Solicitor-General aware that his opposite number has publicly stated that the implications of the agreement go far beyond consultation? Does he agree with that?

The Solicitor-General: My answer is no to both parts of the right hon. Gentleman's supplementary question. The agreement is perfectly explicit. I believe that all concerned—I am certain that this applies to the Attorney-General for the Republic of Ireland—are capable of interpreting and construing both its meaning and effect.

Crown Prosecution Service

Mr. Nicholas Brown: asked the Attorney-General if he will make a statement regarding the establishment of the new Crown Prosecution Service.

The Solicitor-General: Good progress has been made towards the establishment of the service in all areas, but especially in the six metropolitan counties and in the counties of Durham and Northumberland, where it will become operational on 1 April 1986. My right hon. Friend the Home Secretary made the necessary commencement order in respect of those areas last week, and my right hon. and learned Friend the Attorney-General has made the regulations under which the transfer of staff to the new service will be effected. Elsewhere, chief Crown prosecutors have been designated for 24 out of 25 areas, and they are actively planning the structure of the service in those areas.

Mr. Brown: The Solicitor-General will recall that at Question Time on 1 July 1985, the Attorney-General assured me that it was the Government's intention that it should be a
properly remunerated service which will attract talented people and offer a good career structure."—[Official Report, 1 July 1985; Vol. 82, c. 13.]
How can that assurance be reconciled with the staff transfer regulations tabled last Friday, which reduce the wage rate in the new service from what is currently paid? How can such Dickensian meanness be reconciled with the Prime Minister's statement that no resources will be spared in the fight against crime?

The Solicitor-General: I have always said to the House—and it has been the consistent view of my right hon. and learned Friend the Attorney-General—that we must offer such terms and conditions as will attract, retain and motivate people of the necessary high quality. Equally, we must ensure that the taxpayer is not presented with a tax bill that is higher than necessary. We had some experience of that with previous reorganisations. As the hon. Gentleman knows, I was recently able to offer improved terms. We have reached the point at which those two objectives can be achieved.

Mr. Lawrence: Is my hon. and learned Friend aware of the threat to the integrity of the dual profession system that is posed by the Crown Prosecution Service, which will inevitably try to press the frontiers of rights of audience further than has hitherto been acceptable? Will my hon. and learned Friend give an undertaking that the Government will resist these pressures?

The Solicitor-General: The Government's position has been expressed by my right hon. Friend the Prime Minister in accepting the advice of the Benson Royal Commission that the professions should continue to have divided functions. That remains the position of the Government, and I see no danger of the sort to which my hon. and learned Friend referred. It is in the public interest, which is the only criterion that counts, that matters should remain as they are.

Oral Answers to Questions — OVERSEAS DEVELOPMENT

South Africa

Mr. Stuart Holland: asked the Secretary of State for Foreign and Commonwealth Affairs what is Her Majesty's Government's policy towards the South African Development Corporation conference in the light of the political situation in South Africa.

The Minister for Overseas Development (Mr. Timothy Raison): We give our support to this organisation, especially to its work in improving regional economic links. We have already pledged £12 million towards such projects. I plan to attend the next SADCC meeting wih donors, which takes place in Zimbabwe in January.

Mr. Holland: We are delighted to hear that the Minister will be at the Zimbabwe meeting. Presumably he is aware that SADCC estimates costs of at least £1,000 million from the destabilisation in the front-line states caused by South Africa. Can he assure the House that there will be a significant net increase in the United Kingdom's contribution to SADCC over and above what he has said? Does he dissociate himself from the Prime Minister's remarks, before she went to Nassau, that the front-line states could not expect any increased aid in the event of biting sanctions taking effect?

Mr. Raison: I am considering the possibility of further assistance and whether I can announce anything of that sort at the SADCC meeting. However, there is no doubt that sanctions would bite heavily on many SADCC member countries, and one would have to think hard before coming to the view that that was a good thing.

Mr. Anderson: Does the Department or the Commonwealth have any contingency plans to deal with such an occurrence?

Mr. Raison: No, Sir.

Ethiopia (RAF Aid)

Mr. Chapman: asked the Secretary of State for Foreign and Commonwealth Affairs what has been the cost of the Royal Air Force's contribution in distributing emergency aid in Ethiopia; and if he will make a statement about its future role in such situations.

Mr. Raison: As I announced last week, the British airlift, which has made such a magnificent contribution to relief operations in Ethiopia since November 1984, will be discontinued in the latter part of December. I expect the cost to have been about £21 million by the time the operation ends. The services have also made a valuable contribution to the recent relief operations in Mexico and Columbia. I am sure that the Ministry of Defence will continue to do all it can in the future.

Mr. Chapman: I applaud the initiative taken by the Government. Has my right hon. Friend estimated the number of lives that the airlift has saved? Will he confirm that the airlift is being withdrawn because there are sufficient lorries available for the distribution of food, and that roads that were impassable are again capable of use?

Mr. Raison: My hon. Friend has stated the reasons for withdrawing the airlift. I cannot give a realistic figure for the number of lives that have been saved, but about 31,000 tonnes of food aid have been airlifted over the past year, and the Royal Air Force has flown on average 10 hours every day since November 1984—a remarkable performance.

Mr. Stephen Ross: I add my congratulations to the RAF on its magnificent achievement. In view of the terrible happenings in Colombia and Mexico, is there not a case for this relief work to be put on a more permanent basis, if only in reserve?

Mr. Raison: If the hon. Gentleman reflects, he might feel that that is wrong. The valuable part of our contribution in Latin America has been the fact that we have been able to draw on the forces in Belize to operate rapidly. We could not possibly have forces dotted across the world for such a purpose.

Mr. Bowen Wells: I add my congratulations to the RAF, which has set such a fine example to all people in assisting those in dire need and famine conditions. In future, does my right hon. Friend intend to use more charter aircraft, in particular, to help Sudanese famine victims, where we also contributed Hercules transport planes for use as a bridge from east to west Sudan?

Mr. Raison: I am grateful to my hon. Friend for his tribute to the RAF, which the House shares. Army air dispatchers have also played a valuable part in the airdrop operations in Ethiopia. It is true that we have used charter aircraft in the Sudan. It is our job to judge what is best and most suited to any emergency that may arise.

Mr. Fisher: Before the Minister made his decision to withdraw this excellent assistance, did he manage to have any discussions with the Ethiopian Government to assure himself that the most remote areas, which have received assistance by this route, will continue to get grain? Contrary to what the hon. Member for Chipping Barnet (Mr. Chapman) said, some areas on the higher plateaux cannot be reached by road.

Mr. Raison: I saw the head of the Ethiopian relief and rehabilitation commission, Major Dawit, and he told me that he had no complaint about our decision. There are and always will be remote areas, but I am satisfied that our decision is right and humane.

International Fund for Agricultural Development

Mr. Nicholas Baker: asked the Secretary of State for Foreign and Commonwealth Affairs whether Her Majesty's Government plan to make a further contribution to the International Fund for Agricultural Development; and if he will make a statement.

Mr. Deakins: asked the Secretary of State for Foreign and Commonwealth Affairs what is the present United Kingdom contribution to the International Fund for Agricultural Development; and if he intends to increase this.

Mr. Raison: We have so far contributed £30.9 million to IFAD. Negotiations in respect of the next replenishment, to cover the years 1985 to 1987, are still not completed. If and when that replenishment is agreed, the Government plan to contribute to it the same percentage of the OECD share as we contributed to the first replenishment.

Mr. Baker: That answer is welcome to many of us. Does my right hon. Friend agree that Third world countries want help in developing agriculture? Will he try to ensure that, as a proportion of our total aid, our contribution to this fund is increased in future years?

Mr. Raison: I agree that the development of agriculture is a high priority throughout the Third world. IFAD does a good job, but I remind my hon. Friend that the more we put into multilateral agencies such as this, the less is available for our own bilateral programme, which also does a good job, and which, unlike IFAD, is overwhelmingly targeted on poor countries and on giving grants rather than loans.

Mr. Deakins: In view of the rapid population growth in many parts of Africa, should we not both multilaterally and bilaterally give much greater priority to resources for raising domestic food production? Should that not be a top priority in all our programmes?

Mr. Raison: Yes, I agree that the raising of domestic food production in these African countries is one of the principal targets of my Department and also of the European Community.

Famine (Prevention)

Mr. Spearing: asked the Secretary of State for Foreign and Commonwealth Affairs whether he has any

plans for the expansion of those scientific units of his Department whose work concerns the prevention of famine.

Mr. Raison: I have no present plans for their expansion.

Mr. Spearing: If, as the Minister has just said to my hon. Friend the Member for Walthamstow (Mr. Deakins), increasing food production is one of the principal targets of Her Majesty's Government, why have they cut research services at the Tropical Development and Research Institute and the Land Resources Development Centre? Is he aware that the latter has had to turn down applications for work on preventing famine? Would not one tenth, or even one twentieth, of the sum properly spent on the RAF work in Ethiopia transform the work of these departments and restore the Government's cuts?

Mr. Raison: There have been cuts in our scientific units, as the hon. Gentleman well knows, but they are still capable of doing an extremely valuable job. They have never been able to take on all the work that they have been asked to do. Obviously there are limitations on their resources. However, I assure the House that we value them highly, and their work is a valuable complement to the emergency relief work that we do.

Disasters (Relief Aid)

Mr. Knowles: asked the Secretary of State for Foreign and Commonwealth Affairs whether he is satisfied that his Department is able to respond rapidly with relief aid to disasters.

Mr. Raison: Experience in Africa, Mexico, Colombia and elsewhere has shown that my Department, and in particular our disaster unit, is well able to respond rapidly and effectively.

Mr. Knowles: May we have an assurance that that also applies to the EC, because liaison is often necessary?

Mr. Raison: The EC does not have a disaster unit as such. On the other hand it has, with a good deal of prodding from ourselves, very much strengthened its ability to provide emergency relief over the past year.

Mr. Holt: On a point of order, Mr. Speaker. The hon. Member for Ealing, Southall (Mr. Bidwell) was not present when his question was called and we went on to the next question. The Opposition spokesman was then allowed to refer to that question—

Mr. Speaker: Order. I know, and I should not have allowed it.

Liverpool City Council

Mr. David Alton: (by private notice) asked the Secretary of State for the Environment what discussions he has had with Liverpool city council or its advisers about the financial arrangements made by the city council for the remainder of the current financial year.

The Secretary of State for the Environment (Mr. Kenneth Baker): I have consistently refused to have any discussions with Liverpool city council. My officials have informed the city council and the commercial organisations concerned that deferred purchase arrangements undertaken by local authorities do not require Government approval and that such arrangements carry no Government guarantee.

Mr. Alton: Can the Secretary of State confirm that the payment of nearly £30 million in interest on the loan will, when added to Liverpool's existing debt of £700 million, not only mortgage Liverpool up to the hilt but give it the dubious distinction of becoming the district council with the biggest council debt in Britain? What assurances are being given by the council to Phillips and Drew about balancing the city council's books next year, especially in view of the comments of Mr. Tony Mulhearn, the president of the unlamented and late district Labour party, that the Militants in Liverpool intend to plunge the city into chaos again next year?
Will the right hon. Gentleman also confirm that that interest is at a higher rate than that offered by the Public Works Loan Board? What questions has he asked about the source of that funding, which comes via Swiss clearing banks, which are notoriously the providers of some of the dirtiest money in the world? Does the right hon. Gentleman agree that as serious questions remain unanswered about rate support grant and housing investment programmes, he should now meet a delegation of leaders from all the parties in Liverpool?

Mr. Baker: I have no standing in the relationship between Liverpool city council and its financial advisers. The council agreed this year's budget only last Friday, let alone settling next year's budget, but again that is a matter for Liverpool city council. The people of Liverpool have been bought a breathing space at great future cost, which will start coming through in 1987–88. It is the old Socialist solution—borrow, borrow, borrow now; pay, pay, pay later.

Mr. Malcolm Thornton: Is my right hon. Friend aware that many people, not just in Liverpool, but throughout Merseyside, view with considerable suspicion the fudged agreement that Liverpool city council has been able to come up with and see it merely as a postponement of the inevitability of the bankruptcy of Liverpool?

Mr. Baker: My hon. Friend is right to be concerned. This is a postponement. The city council refused to treat seriously most of the Stonefrost report's recommendations. As I have already made clear, this is only postponing the day of reckoning for Liverpool.

Mr. Eric S. Helfer: Is it not clear that the money that Liverpool city council has been forced to borrow from Swiss banks should have come from Government sources, and that the reason for the crisis in

Liverpool is the Government's policy? Over a period of time the Government have deliberately refused to meet the city council to discuss the matter and have tried to bankrupt the city for political gain. Is the right hon. Gentleman aware that if the Liberal party's proposals had been accepted last Friday Liverpool would have been back to square one and would have run out of money?—[HON. MEMBERS: "Nonsense."] Hon. Members may say "Nonsense", but if they and the creeps in the Liberal party—

Mr. Speaker: Order. I hope that the hon. Gentleman will rephrase that remark.

Mr. Hafer: If the hon. Gentleman and the honourable creeps in the Liberal party—

Mr. Speaker: Order. That is better, but not good enough.

Mr. Hafer: If I am allowed to say "crawlers", Mr. Speaker, I shall say so. They are responsible for what has happened.
May I also draw the right hon. Gentleman's attention to an interesting article in today's edition of The Guardian, by Geoff Andrews? It illustrates how Liverpool is at last beginning to deal with its housing problems. Would it not be better for the Government and other right hon. and hon. Members to concentrate on supporting Liverpool city council, instead of attacking it?

Mr. Baker: The hon. Gentleman seeks to lay blame other than where it should truly lie. He seeks to blame the Liberals, whether they are creeping or crawling. He seeks to blame the Government, although they were the subject of a campaign of direct blackmail. The councillors of the city of Liverpool must be responsible for putting their own house in order. They have conducted a sustained campaign of blackmail against the Government. No effort has been spared in this campaign to hit the employees, to crush the voluntary sector and to endanger the welfare of the people of Liverpool. Everything has to be sacrificed to promote the ambition and to flatter the vanity of a few councillors.

Mr. Fred Silvester: Is not one of the outstanding features of this settlement the fact that the people of Liverpool will have to carry a future burden for present advantage? Will my right hon. Friend draw attention to other councils which are stacking up future difficulties for exactly the same reason?

Mr. Baker: My hon. Friend is prescient, and he is correct to be worried about what I believe is implied in his question—the tactics that might be used by the city of Manchester. If councils get up to dubious financial tricks, they will solve nothing. They are not facing the responsibility of running their cities efficiently, fairly and properly. They cannot shuffle off that responsibility.

Mr. Frank Field: Does the Secretary of State accept that Liverpool faces massively serious problems over and above the grotesque activities of the Militant Tendency? Is he aware that job losses in the area since his party came to power have been double the national average? As a budget settlement has now been reached, what new action do the Government intend to take to help Liverpool andthe surrounding area?

Mr. Baker: The rate support grant system recognises the inner city deprivation that faces Liverpool. Of all metropolitan districts, the city of Liverpool has the second


highest grant-related expenditure assessment. The Government recognise that problem. They have provided the city of Liverpool with £30 million over and above its grant entitlement for the Merseyside task force and for city projects, some of which, as the hon. Gentleman knows, have been undertaken in his constituency. In addition, I provide an extra £20 million a year for the docklands development corporation. For the area of Merseyside, which is broader than the city of Liverpool, Government agencies and Departments provide about £1 billion a year, of which £400 million is spent in the city of Liverpool.

Mr. John Heddle: Is my right hon. Friend aware that his steadfastness in not becoming involved in the internal Labour party political squabble is much welcomed? Will he confirm that the only way— [Interruption.] in which the city of Liverpool will attract real wealth and jobs is by—

Mr. David Winnick: Rachmanite.

Mr. Speaker: Order. The hon. Gentleman must not say that.

Mr. Winnick: It is true, Mr. Speaker.

Mr. Speaker: Order.

Mr. Heddle: Does my right hon. Friend agree that the only way in which the city of Liverpool will attract real jobs, wealth and prosperity is if the city council runs its affairs on truly democratic and accountable lines?

Mr. Baker: I agree entirely with my hon. Friend. If I had not stood fast in this matter but had shown that I was prepared to negotiate or give way, it would have been a very bad day for local government in our country. Every council would have known that it could use such revolutionary tactics, the purpose of which was to create chaos in Liverpool and suffering for its people.

Mr. Ken Eastham: As the Minister referred to Manchester, may I remind him that Manchester runs a very successful municipal airport—probably the most successful in the country—which contributes to the rates of the city? How, therefore, can the Minister justify taking that airport away from the city of Manchester?

Mr. Baker: I think that that question goes a little wide, and it was dealt with in the abolition debate.

Mr. Richard Ryder: Is my right hon. Friend aware that thousands of my constituents, who have seen billions of pounds of public money poured into Liverpool, will be relieved at the Government's robust approach to the issue?

Mr. Baker: I agree with my hon. Friend. If the Government had decided in any way to give in to Liverpool, there would have been repercussive effects upon the whole of local government finance. Many councils made it clear that they did not want me in any way to accommodate Liverpool's demands, and many of those councils are under Labour control.

Mr. John Cartwright: Is the Minister aware that it is not only Manchester that seems intent on following the Liverpool example? Are not a number of London boroughs now well down the Liverpool road? When they run out of money, will they, too, conclude one of these curious deals with the gnomes of Zurich? If so,

will that not drive a coach and horses through the Government's much professed claim about controlling local government spending?

Mr. Baker: In the past, such deals have usually been entered into by local authorities for relatively small sums for bridging finance. As has been made clear today by several hon. Members, that is a very imperfect—and I think fundamentally wrong—approach to local government finance, because it postpones the day of reckoning and means that the costs will be very much higher when they begin to come through—which I believe will be within two years for Liverpool.

Mr. John Watts: Can my right hon. Friend confirm that, even at the supposed height of the financial crisis, Liverpool city council was able to scratch together sufficient money to pay the bailiffs who were about to repossess Councillor Hatton's official car? Does my right hon. Friend not find that a strange priority for the city council?

Mr. Baker: I now find little strange in the decisions of Councillor Hatton, but I agree that that was one of the more bizarre events of the past few days.
I understand that Councillor Hatton was, at one time, intending to appear in a Christmas pantomime. He does not have to wait until Christmas—he has been running a pantomime for the past year, but has had to withdraw because even the front end of the horse objected.

Mr. D. N. Campbell-Savours: Is the Secretary of State aware that since 1979 this Government have given to the better-off almost £12,000 million through capital transfer tax, capital gains tax and other concessions? Is he further aware that the argument in Liverpool is about £25 million—a small sum compared with £12,000 million? Had the Government forked out that money earlier this year, rather than giving massive tax concessions to the better off in society, there would have been no problems in Liverpool and no deficit budget strategy. Indeed, the problems of the city would be en route for solution.

Mr. Baker: The question is not just one of £25 million. It was a deliberate and sustained attempt to undermine the whole of the local government finance system— [Interruption.] —and that system was approved by the House of Commons. It is not unreasonable to expect local authorities to implement and approve arrangements agreed by this House.

Mr. Campbell-Savours: The right hon. Gentleman should get his priorities right.

Mr. Baker: I would have said that that was getting my priorities right.

Mr. Derek Spencer: If there are maggots in the body politic of Liverpool, there is warble fly in the body politic of Leicester. Will my right hon. Friend ensure that those two groups of pests do not get together and sting the long-suffering ratepayer in Leicester?

Mr. Baker: My hon. and learned Friend's knowledge of the insect world is greater than mine, but I have no doubt that, not in all but in several councils in our towns and cities, very Hard Left Left-wing councillors are being adopted. I only hope that people will have seen what


happens when the militants get in control, as in Liverpool, and that they will not seek to drive their cities and towns down that road.

Dr. John Cunningham: Now that the city council in Liverpool has balanced its budget, will the Secretary of State agree to meet the leader of the city council so that the future problems of the city, which are far from resolved, may be discussed? Will he, in particular, agree to review the historically low target for expenditure, which is the root cause of the city's financial problems, as was highlighted by the Stonefrost report?
Does the Secretary of State recall his announcement of 20 November on housing investment cuts—cuts for the sixth successive year—and does he recognise that such cuts can only make a very serious situation in the city of Liverpool even worse? Will he refrain from misleading the House and the country by suggesting that the Government are concentrating their resources on the inner cities, when, for example, since 1979 Liverpool has lost almost £400 million in rate support grant and gained just under £80 million in urban programme, which is a net loss to the city's income of £320 million? It is untrue to suggest, as the right hon. Gentleman is suggesting, that somehow the Government have been bringing resources to the inner cities, when consistently they have been taking them away.
In view of the report of the Archbishop of Canterbury—[Interruption.] We understand why Conservative Members do not like even the Church condemning what the Government are doing in the inner cities. In view of the archbishop's report—which is just the latest in a long line of damning indictments of the Government's
inner city policy—will the right hon. Gentleman reconsider the impact of the cuts on Britain's inner cities, and change policy?

Mr. Baker: The answer to the hon. Gentleman's point on housing is that one of the most distressing aspects of the whole Liverpool saga of the last year has been the way in which Liverpool city council has conducted a vendetta against the housing co-operative movement in Liverpool, a movement which we have strongly supported—[Interruption]—with resources. We shall be providing resources for the development in Eldon street.
The hon. Gentleman asked whether I would meet the leader of Liverpool city council—[HON. MEMBERS: "Which leader?"] They have an elected leader, who, I believe, is rather busy on Mr. Hatton's closed circuit television. I have always said that I should be willing to meet a delegation of members from Liverpool city council when they behave reasonably and legally, which is the position that I have with all other councils in the land.
The hon. Member went on to ask about providing resources for Liverpool. Some of the grant has been lost as a result of Liverpool city council refusing to run its services efficiently. Indeed, its services are about 30 per cent. more inefficiently run than those of the average metropolitan district.
The hon. Gentleman will recall that the Bishop of Liverpool and the Archbishop of Liverpool wrote an article in The Times in which they deplored the confrontation, which has to a great extent been manufactured by the Militant leadership of the city council. The bishops pointed to Militant's intransigence and unwillingness to engage in serious dialogue. I am glad to say that that is a matter on which I find myself at one with the Church.

Housing (Church of England Report)

Mr. Willie W. Hamilton: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 10, to discuss a specific and important matter that should have urgent consideration, namely,
"the report of the Church of England commission on urban priority areas".
The report deals with the comprehensive and catastrophic failure of Government policies in our cities in housing, in matters of poverty, taxation and employment, and in other fields.
The whole nation should thank the established Church of England for its objective investigation into the problems of our inner cities, and not least for its condemnation of the divisive and manifestly unfair housing policies pursued in the past six years. This highly objective report was undermined—

Mr. Tony Marlow: rose

Mr. Hamilton: The hon. Gentleman should learn that he cannot intervene on a motion of this kind.
I was about to say that the report underlines and supports two opinions expressed by royal princes, Prince Philip and Prince Charles, on the very matters that I have raised.

Mr. Speaker: Order. The hon. Gentleman knows that we do not bring members of the Royal Family into our arguments in this place.

Mr. Hamilton: I understand that, Mr. Speaker. I think the House is well aware of the point to which I am referring.
No one can doubt that the problems referred to are specific and manifold. They are laid out in detail in The Times today, and effectively reply to the hon. Member for Northampton, North (Mr. Marlow), who attempted to intervene. The Government were given advance copies of the report as a matter of courtesy, and with typical arrogance, brutality and intolerance they decided to jump the gun and to savage and rubbish the report before its official appearance tomorrow. The Government's response to the report is as damaging and as offensive as their reponse to the Duke of Edinburgh's report on the same matter. The Government's response is to savage the messenger rather than the policies on which the commission commented.
That all the matters referred to in the report are urgent cannot be in dispute. On every day that passes the decay in our inner cities goes on remorselessly, and it is there for everybody to see, except those who refuse to see it—the Ministers concerned. The decline and decay are worrying to everyone in the country, excpet Ministers. The Government are flying in the face of reality and of all the evidence that is available to every hon. Member, whatever his or her constituency.
It is rather significant that The Times reports today that "Government reaction"—
that is, to the report—
now appears to be in marked contrast to the high level of co-operation the commission received from Government Departments, five of which submitted evidence.
That is sufficient condemnation of the Government in round terms.
I suspect, Mr. Speaker, that you will refuse my request, on the ground that the criticism of the Government is so comprehensive as to be encompassed in a future debate—an inquest into the failure of the Government in the past six years in all the matters to which I have referred. Nevertheless I ask you to enable us to debate the report as a matter of urgency, because it will not go away. There are bound to be some debates on it in the course of the next few months.

Mr. Speaker: The hon. Member for Fife, Central (Mr. Hamilton) asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
the report from the Church of England concerning the failure of the Government's inner city and housing policies.
In his concluding statement the hon. Gentleman said that he thought there would be many debates on the matter in the future. I have listened to what he has said, but I regret that I do not consider the matter that he has raised to be appropriate for discussion under Standing Order No. 10 and, therefore, I cannot submit his application to the House.

STATUTORY INSTRUMENTS &c.

Ordered,

That the draft Restrictive Trade Practices (Services) (Amendment) Order 1985 be referred to a Standing Committee on Statutory Instruments &c.—[Mr. Lennox-Boyd.]

Orders of the Day — Dockyard Services Bill

Order for Second Reading read.

Mr. Dick Douglas: On a point of order, Mr. Speaker. During business questions on Thursday I raised with the Leader of the House the question of the provision of a report that is available to members of the Select Committee on Defence if they choose to go to a room upstairs and read it. It is a restricted report, but it is also available to the contractors.
I shall quote from phase I of the Touche Ross report to ut my point of order into context. It
constitutes an interim stage in a process which will eventually result in a significantly"—

Mr. Speaker: Order. Is the report being given as evidence to a Select Committee? The hon. Gentleman should not quote from a report that is before a Select Committee.

Mr. Douglas: I understand that the phase I report is available in the Library of the House. It is generally available and is not restricted.

Mr. Speaker: What then is the point of order?

Mr. Douglas: I am trying to put my request into context. I shall begin the quotation again. The report "constitutes an interim stage in a process which will eventually result in a significantly longer and more detailed report. This full report, referred to herein as phase II, will attempt to provide prospective contractors with comprehensive background information to assist the preparation of bids for the operation of Rosyth/Devonport dockyards."
The phase H report, which is classified and is available to Members of the Select Committee, is also available to those who are making bids for the dockyard, on the basis that they need to know the nature of the assets for which they will be bidding. The House requires equivalent information before it can adequately ascertain the nature and purpose of the Bill the Second Reading of which the Minister is anxious to begin.
I appreciate that some of the information is likely to be classified, because I have read the document and know that it contains some biographical detail. The Minister is furrowing his forehead, but I am asking you, Mr. Speaker, to examine the report before the Committee stage or, more appropriately, before we go any further with the Bill. I ask that the full content of the phase II report be made available to the House so that we can have the same information as is available to those in private sector industry, who may or who may not be friends of the Minister, and who are bidding for those vital public assets.

Mr. Speaker: Order. I do not think that the point raised by the hon. Gentleman is a matter for me. If the report is before a Select Committee—

Mr. Douglas: It is not.

Mr. Speaker: If it is not, and if, as the hon. Gentleman said, other hon. Members can refer to it, I cannot see that there is any point of order for me. The report is available. I do not understand what the point of order is about.

Mr. Ian Mikardo: Further to that point of order, Mr. Speaker. It is true that a small number

of hon. Members can go and see the report, but the overwhelming mojority of hon. Members are not allowed to see it. One understands that there are circumstances in which that must be so, because some reports must be restricted, but what conceivable justification is there for denying to any hon. Member of the House information that will be circulated round the offices of some companies? If it is freely available in the offices of a company, it cannot be all that sensitive, and thus it should be available to hon. Members. Is it suggested that hon. Members are less trustworthy than clerks in the offices of a company?

Mr. Speaker: I am sympathetic to the point of arder, but I have to repeat that it is not a matter for me. It is up to the Government to make reports available.

The Minister of State for Defence Procurement (Mr. Norman Lamont): I am not sure whether this is a point of order, Mr. Speaker, but it is common for certain information to be available to defence contractors, or potential defence contractors, which is not widely available to the House of Commons. Sometimes classified information is available to Select Committees, particularly the Select Committee on Defence, which is not available to the House as a whole. That is the explanation. I shall look at the point that has been raised and see what information can be made available to the House. I do not make a commitment, but I shall see what can be done.

Mr. Speaker: I call the Minister to move the Second Reading of the Bill.

Mr. Lamont: I beg to move, That the Bill be now read a Second time.
I apologise to the House for the absence of the Secretary of State, who has to be abroad today at an important and long-standing NATO meeting. He has given his apologies to the Opposition Front Bench spokesmen.

Mr. Michael Foot: I am sorry to interrupt at such an early stage, but the apology should be not only to my right hon. and hon. Friends on the Front Bench but to the House. It is an extraordinary state of affairs. If it was known for a long time that there was an important engagement for the Secretary of State to attend, the debate could have been held on another day. Did the Minister's Department make a request to the Leader of the House for the date to be changed so that the Secretary of State could be here to present his Bill? Some of us remember the controversy over the Bill. For the right hon. Gentleman not to be here is a gross act of discourtesy to the House of Commons. We should like to hear the explanation.

Mr. Lamont: My right hon. Friend has to be at a NATO defence planning meeting, which is an unavoidable commitment. There have been discussions through the usual channels about the timing of the debate. There were also discussions about extending the debate from the original half day to a whole day. That has contributed to the problem.
Hon. Members will recall that my right hon. Friend made his statement on 23 July on the future of the royal dockyards at Devonport and Rosyth. He explained why the Government were convinced that the right way to proceed was for the Government to introduce private management into the royal dockyards, while the Government retained ownership of the fixed assets. The Government, in effect,


would be leasing the assets to commercial managers. Since that announcement, and despite further discussion, it remains the Government's view that, of the various options, private management under fixed-term contracts provides the greatest incentive to improving efficiency and reducing operating costs. The purpose of the Bill is to enable the Government to proceed with those plans.
Ever since the Government came to office in 1979 we have attached the highest importance to improving and making more adequate the defences of the United Kingdom. For that reason, defence spending is over 20 per cent. higher in real terms than in 1979, of which the Government and their supporters are justifiably proud, but adequate defences are not ensured simply by increasing spending. That is not the only way in which to increase the security of the country. The Government, through their procurement policies, introducing new competition, and through their policies for improving the management of defence establishments, have been determined that within our large defence budget there should be increasing value for money. That means looking at the ways in which we have customarily conducted defence business, and also that in certain areas we must face the need for change.
Over the past 15 years there have been many studies of the organisation of the dockyards, for example. the Mallabar report and the Speed report. The Public Accounts Committee has produced several reports, the Select Committee on Defence has produced reports, and there have been others. There have been many different recommendations, but all have agreed on the nature of the problems facing the dockyards. Everyone has agreed that there is room for improvement and that changes are necessary. Even the trade unions have said that they consider that there is a need for improvement. Even the Plymouth chamber of commerce, which, I freely admit, has been opposed to the Government's proposals, has said that at worst Her Majesty's dockyard is wasteful and non-competitive. On both sides there has been recognition of the need for improvement.

Mr. Donald Stewart: Is the Minister aware that that is not the case at all? Many people who agree with the Minister's philosophy about privatisation, and many who share the Government's views on defence, are opposed to the change in the status of the dockyards. They do not agree that it is worth while.

Mr. Lamont: I do not think that the right hon. Gentleman was listening to what I was saying. I did not say that all the reports agreed with the Government's conclusions. I said that they had all analysed the problem and said that improvements were necessary in the operation of the dockyards. That is incontestable.
The Government believe that changes in three areas must be the basis of any new arrangements that are designed to bring about an improvement. First, the dockyards, as suppliers, must be separated from the fleet, as customers. Secondly, accounting procedures need to be introduced that will reflect normal commercial practice so that we know precisely the performance of the yards and the exact costs of meeting the fleet's requirements. Thirdly, local managers should be given more authority to manage. It is against those criteria that we have judged the different options.
We set out those options for change in an open government defence document in April this year. The

options in that document range from full privatisation to a trading fund. We made it clear that our preferred option was the introduction of private commercial management. We made it clear that we were prepared to consider alternatives, but that those alternatives would have to he measured against the three criteria that I have described.
The publication of that open government document marked the beginning of a period of consultation, which lasted just under three months. Before that there had been reactions to Mr. Levene's report, which had been leaked, and discussions for many years on the basis of the reports to which I referred. All interested parties were able to express their views. The Select Committee and the Public Accounts Committee published reports in time for us to be able to take them into account.
Although there was considerable criticism of the Government's proposals, the Government—as the Government are entitled to do—did not consider that any of the other options or any of the arguments put forward gave the same benefits in terms of the probability of improving efficiency, improving work practices and giving value for money. Once the Government had made it clear that they were determined to change the dockyards, many people and bodies then favoured change, although I doubt whether that willingness to change would have existed if the Government had not been determined to face the problem, which had been acknowledged in the past but which previous Governments had never faced.
I shall now refer to the provisions of the Bill and to the areas of anxiety to the House and the work force. The Bill is limited. The concept of introducing private management is that contractors will tender to complete work in progress and for a programme of refit work for a period of seven years. The Government intend to set up two companies to operate each of the two dockyards, on or before vesting day, which is intended to be in April 1987. The management and work force associated with the dockyards would be transferred to those two companies. On vesting date, the commercial managers, selected by competition, would take over the companies and transfer their top and supporting management to them. The Ministry of Defence would then place contracts for the repair and refitting of ships with those companies.

Mr. Denzil Davies: As this is an enabling Bill, will the Minister tell the House what percentage of the total amount of dockyards' work will be subjected to tender? Will it be more, or less, than 50 per cent.?

Mr. Lamont: I shall deal with that in a moment. Perhaps I could develop my argument, but if the right hon. Gentleman wishes to interrupt me, I shall give way again.
Clause 1 governs the transfer of persons employed in the dockyards from Crown employers to a company formed under the Companies Acts, which would then become the employer.

Mr. Douglas: Will the Minister give way?

Mr. Lamont: I should like to proceed a little further.
Under clause 1, that company could be an employing or a management company. Those who have followed the matter in detail will know that we considered having two companies for each dockyard—an employing company and an operating company. That is consistent with the wording of the Bill, but the Government intend that there should be one company—an operating company—for


each dockyard. Trade unions and potential contractors made representations to us about that, and the Government responded by changing their view.

Mr. Douglas: The Minister presents the case that the Government are opting for an operating company for each dockyard as if it were almost crystallised. For the benefit of the House, will he state the Government's thinking that led them to choose operating companies rather than employing companies with some corporate management structure?

Mr. Lamont: The structure is simpler. Potential contractors and some trade unions felt that it was simpler and would give them a greater sense of security. That is why the Government changed their mind.

Dr. David Owen: The Minister spoke of one operating company per dockyard, which means that the Government have excluded any possibility of splitting a dockyard into more than two or three separate parts with separate companies. Will he confirm that important point?

Mr. Lamont: It is certainly our intention that there should be one company for each dockyard. I have not considered the option of splitting the dockyards, and, as far as I am aware, that is not under consideration.
Before I develop in more detail precisely how the Government intend to proceed, I shall deal briefly with the other clauses.

Mr. Merlyn Rees: Will the Minister give way?

Mr. Lamont: I have given way many times.

Mr. Rees: I only want to ask a short question. Clause 1(1) refers to
the qualified dockyard service employees,
who, in my day, were subject to both sections 1 and 2 of the Official Secrets Act 1911. They receive information about vessels, which is of importance to the Soviets and others, as the Americans are showing us. There is nothing in the Bill about the transference of those employees and whether they will remain subject to and have to sign a bit of paper under the Official Secrets Act, section 1—the spying clause—and section 2. If the matter is dealt with later in the Bill, I have asked my question at the wrong time, but does the Act apply?

Mr. Lamont: That is not specified in the legislation, but obviously it is an important point. The same procedures as would normally apply to private defence contractors will apply. I do not foresee any great difficulties about that.
Clause 2 provides that all land at present in the dockyards will, even after vesting day, and regardless of any rights which the contractor might otherwise have, be treated as Crown land for the purposes of the continued rights and powers of the Ministry of Defence police to operate in the dockyard. Clause 2 also ensures that a contractor does not acquire security of tenure if intentionally or otherwise he obtains the tenancy of dockyard land.
Clause 3 provides for my right hon. Friend the Secretary of State to incur expenses in setting up and operating Companies Act companies to provide dockyard

services, and, for example, at the end of a fixed-term contract, or in time of tension or war, to assume the liabilities of the company.

Mr. Robin Maxwell-Hyslop: As my hon. Friend moved rapidly from clause 2 to clause 3, he told us of the powers that the Ministry of Defence police would have. Will the Devon and Cornwall constabulary have duties in respect to Devonport, for which it must make financial provision, but which it does not at present have in respect of the royal dockyard?

Mr. Lamont: I do not think that that will be the case, because the military police will carry on in the same way. I shall certainly investigate my hon. Friend's point, and if I can give him any further information, I shall certainly do SO.
Clause 1 allows the Secretary of State to transfer the ownership of each of the companies that he sets up to a third party, the contractor, who then operates the dockyards on his account. Clearly the selection of the third party concerns the House, and I shall describe the approach that the Government will adopt.
No commitment will be entered into until the Bill has received Royal Assent. [Interruption.] This is big of me, is it not? There have been accusations that the Government were about to do that. Subject to satisfactory progress on the legislation, we shall in the spring issue an invitation to tender for the operation of each of the two dockyards. The tender will cover a period of seven years and will identify a core programme of work for each dockyard. That programme will be sufficient to make each dockyard viable, and, at the beginning, will certainly be equal to the present load of the two dockyards. It will be equivalent to some 70 per cent. of the refit programme.

Mr. Cyril D. Townsend: Will my hon. Friend make it clear that the Government have an open mind about the period of time involved? Is he aware that many of his hon. Friends feel that seven years is too short, and that 10 years would be more realistic, with a review after five years? Seven years is a tight period, considering the huge challenge that the management will face.

Mr. Lamont: The Government originally thought of a five-year period, which we have already extended to seven years. I should have thought that a seven-year period was sufficient to judge the performance of a contractor. We want the contractor to be subject to competition pressure, to have an incentive, and to wonder whether his contract will be renewed. That is one of the main purposes of the Bill. I shall consider my hon. Friend's point, but seven years is a fairly long period.
For the early years of the contract the core will be defined fairly precisely. For the later years it will inevitably be indicative of the work that we expect to be offered to each dockyard. I am sure hon. Members will appreciate that a ship refitting programme of the scope and complexity of that of the Royal Navy inevitably changes and that there is no way in which we can guarantee, in 1986, that a particular amount of work will be needed on a particular ship in 1993. However, the broad shape and volume of the core programme can be laid down in the tender documents. The remainder of the naval programme will also be defined in the tender, but only for information at this stage, as it will be available for consultation between whichever United Kingdom companies wish to bid.
In responding, companies will be expected to put forward detailed proposals in two areas. First, there will be management proposals. The companies will have to submit in detail what their management proposals are, what the qualifications will be of those they intend to appoint to run the dockyards, and what their precise proposals are for reducing costs and increasing efficiency. We shall look at the financial standing of the companies, and we shall need to be satisfied that they are capable of doing the job.
Secondly, part of the tender exercise will be to examine the extent to which the bidder is prepared to put himself at risk. We shall therefore be looking at the pricing proposals. Our intention is that work entering the dockyards should increasingly be negotiated on a fixed price basis rather than on a cost plus basis. We expect that after 18 months or two years about 75 per cent. of the work in the dockyards will be done on that basis. Obviously it will take time to achieve that, and we shall want to look at the pricing proposals for the early period as well. Therefore, bidders' proposals will be evaluated for their commitment and management and price competitiveness.
We intend that the successful bidders should be identified in the autumn of 1986, and at the end of the year there would then be a short period of parallel running with the current management to ensure a smooth transition in April 1987 to full commercial management. At that time, my right hon. Friend would transfer to the contractor the ownership of the company in which the dockyard work force and management had been placed.
Initial contracts for a period of seven years will allow the new management plenty of time to build the two dockyards into a fully commercial pattern of operation and a further substantial period of full commercial activity. After the contract has run for the seven years, we shall look at the achievements of the two commercial companies that have been running the dockyards to see whether we wish to hold a further competition to find new managers for a subsequent contract. In this way, we shall maximise the level of competition.

Mr. Martin J. O'Neill: Is the Minister suggesting that there will be a period of 18 months at the beginning, followed by a period of seven years, or is he saying that after 18 months there will be a period of five and a half years, when a decision will be taken?

Mr. Lamont: The contract will run for seven years. I was saying that it will be some time before there can be a fixed price basis for 75 per cent. of the work that we expect. The whole thing, from beginning to end, will run for seven years. The 18 months to two years is merely the transitional period during which we build up to the proportion of fixed price contracts that we want to achieve.
We believe that this approach will provide competition in three different ways. There will be competition between the commercial managers for the initial contract; there will be the continuing competition between the two dockyards and the other ship repair companies for the unallocated programme; and there will be continuous competitive pressure for the next contract—the pressure on existing operators to show that their performance is good enough so that they can win the contract in the future.
We believe that this approach can produce worthwhile savings. Indeed, we owe it to the taxpayer to ensure that the dockyards are operated in the most efficient way

possible. There is no conflict between efficiency and military requirements. Indeed, it is very much in the interests of the Royal Navy that our dockyards should be operated in the most efficient way.
None of the proposals that have been put forward as alternatives in our view offer either this level of competition or the prospect of savings and improved efficiency. A trading fund, which some Opposition Members recommended, would not meet the criteria of competition, and would be able to price itself into profit in a way in which the private sector cannot. At the other extreme, full privatisation would simply mean moving from a state monopoly power to a different set of owners and a private sector monopoly.
As my right hon. Friend made clear when he announced his decision in July, he would be prepared to consider the possibility of running the dockyards as a Government-owned public limited company if the discussions with established companies do not produce an attractive basis for operating our own commercial management proposals. The Bill provides for the Government to operate the dockyards in that way if that proves necessary. However, I am glad to report that there is considerable industrial interest in tendering for the management contract.

Mr. Gordon Brown: Given that the Minister is not ruling out the possibility of a publicly owned company running the dockyards, why does the Bill say that it is designed to transfer persons engaged in dockyard services to the private sector? In Committee, does the Minister intend to rule out the possibility of, for example, debating a public corporation and a trading fund as part of the improvement of dockyard services?

Mr. Lamont: I shall be happy to debate anything that the hon. Gentleman may wish to raise, provided it is in order. As I have made clear, the Bill provides for a Government-owned plc as an interim stage. I was merely saying that if, for any reason, a sufficient number of companies did not want to tender for the contract, or if we did not think that those who tendered were suitable, a Government-owned plc was something on which we could fall back. However, it is the Government's intention to proceed to full contractualisation.
When my right hon. Friend announced the Government's decision, he stated his intention to seek competitive tenders from British companies to manage the dockyards, and he referred to those that had already show an interest. Since then there has been considerable contact between the Department and companies with an interest. Hon. Members may be aware of announcements by the Balfour Beatty/Weir Group and by Babcock International/ Thorn EMI to form groups to prepare bids for the operation of Rosyth. Trafalgar House/Plessey/A and P Appledo:re formed a similar grouping last year to consider a bid for Devenport. Other companies, whose interest has been made public, include British Aerospace, Northern Engineering Industries, GEC, Taylor Woodrow, Tyne Ship Repair and Press Offshore. Representatives from the interested companies have made visits to both dockyards and have been supplied with information so that they can provide responses to an invitation to tender.
Clauses 1(4) to (6) deal with the consequences for personnel who are transferred from the Crown to a company. We understand how unsettling any change, particularly one as significant as this, is for the work force.


We are prepared to have further discussions with representatives of the work force so that at the very least they can hear, understand and inform their members of the correct implications for the work force. Misinformation, intentional or otherwise, is in no one's long-term interests, and we have tried extremely hard to explain to the work force precisely what is involved in these proposals.
I come now to the terms and conditions of employment. They are obviously of considerable interest, but I feel that people have nothing to fear from them. Civil servants employed in the royal dockyards on vesting day who transfer to the company set up by my right hon. Friend the Secretary of State will cease to be civil servants, but will transfer on broadly the same terms and conditions of employment as they enjoy at present. That is secured by the Transfer of Undertakings (Protection of Employment) Regulations 1981, to which clause 1(4) refers. These regulations will ensure that most terms and conditions transfer unchanged to the new employer. There will, therefore, be no change, for example, in take-home pay, leave entitlement or retirement policy as a result of the transfer.

Mr. Gordon Brown: What about pensions?

Mr. Lamont: I am coming to pensions. Trade unions' current rights to negotiate on behalf of their members will transfer unchanged. In future they will be able to negotiate a better deal and, if there is improved performance, wages and rewards to mirror that improved performance. Under clause 1(6), staff transferring to the new company will not, of course, be entitled to redundancy compensation, because they are not being made redundant; they are transferring to a new employer. I emphasise that Civil Service levels of compensation will transfer in the same way as any other term or condition of service.
I shall deal now with the important subject of pensions, which I mentioned earlier. These are specifically excluded from the 1981 legislation to which I referred. Employees in the dockyards are at present members of the principal Civil Service pension scheme. After vesting day, when they cease to be civil servants and cannot remain in the scheme, a new pension scheme will be established. We propose to set up such a scheme with benefits similar to those for the Civil Service. We took similar steps for staff who transferred from the Civil Service into the Royal Ordnance plc. We intend that there should be no worsening of pension provisions as a result of the transfer of employment. The benefits to be provided by the new scheme will mirror as closely as possible those of the principal Civil Service pension scheme. I hope that that will meet many of the unnecessary anxieties that have been expressed.

Mr. Jonathan Sayeed: Will my hon. Friend confirm that the years that someone has accrued in the Civil Service will count towards his pension entitlement or redundancy pay when he reaches pensionable age or is made redundant?

Mr. Lamont: Yes, I confirm that. They will count in the same way. Proposals on future pension arrangements will be subject to full consultation with the employees and the trade unions. Separate pension arrangements will be made for those recruited into the dockyard operating

companies after vesting day. That will be a matter for the management of the operating companies, in consultation with the trade unions.
During the consultation period, and since, many of the most vociferous of the Government's critics on this matter have, in a wholly alarmist and deliberate fashion, emphasised the potential job losses that they forecast as the result of the introduction of commercial management. My right hon. Friend made it clear that in April 1987 there would be a requirement to reduce the numbers employed in both dockyards—at Devonport from just over 13,000 to just over 11,000, and at Rosyth from 6,300 to about 5,900, over two years. Those savings are essential if we are to improve efficiency at both dockyards to allow them to compete effectively and, if possible, win extra work. The Government hope that the introduction of private management will make it possible for the dockyards to compete also for non-military work. Savings of the order that I have described will in any case be essential. They are necessary whatever future management system is chosen for the dockyards. They have nothing to do with the introduction of private management. Such measures are necessary anyway.
From commercial management, we expect to see further improvements in efficiency through changes in working practices, more flexible management and reductions in overheads. The consequences of those improvements will be that fewer men will be needed to carry out the core programme of work, but, as I have said, that relates only to the core. An efficient dockyard will be competitive. A competitive dockyard should be able to gain additional work, and additional work should generate employment. Commercial management is not a risk. It offers a considerable opportunity for the dockyards.

Mr. James Wallace: The Minister has said that the principal reason for the measure is savings, although he has not quantified those savings. He will be aware that the Bill's financial effects claim that although the changes
in the financial relationship between the Ministry of Defence and the dockyards
—are significant, they—
are unlikely to have a major effect on central Government expenditure.
Why are we going through all these significant changes if the effect is to be so minimal?

Mr. Lamont: The figures have been well debated by the Select Committee on Defence and the Public Accounts Committee. I say this by way of illustration. The Government have always said that the savings after recovery of initial costs could be about £29 million to £33 million, which is about 7.5 per cent. of dockyard turnover. Inevitably, those figures are merely estimates. They are dependent upon whatever assumptions are made. The real test is whether the House and hon. Members believe that private sector management will be more efficient and better at obtaining new work and will be able to alter working practices. We cannot quantify those matters, but we remain convinced that private management can bring about the improvements which report after report have said are necessary. I cannot believe that savings of £33 million, or 7.5 per cent. of turnover, are insignificant in terms of Government expenditure. One document stated that the amount was insignificant in terms of the totality of Government expenditure, but I think that it is worth while


in terms of dockyard expenditure. Surely the Government must operate the dockyards and see that their structure is such that they operate in the most efficient way.

Mr. Gordon Brown: Does the Minister accept that his figures of £29 million to £33 million must be set against £60 million of transitional costs necessary to set up the dockyard franchise scheme, and up to £200 million to set up the private pension scheme? If, as those figures show, the Minister is unlikely to save money in the 1980s and well into the 1990s, why is he proceeding with the scheme?

Mr. Lamont: I said that that figure was after the recovery of the initial costs.

Mr. Brown: Give me an answer.

Mr. Lamont: That is the answer. It is the figure after recovery of the initial costs. We cannot say precisely what the savings will be. They depend upon the productivity that the new management obtains. Any figures given are an illustration. We believe strongly that private management is much more likely to generate efficiency and savings than is the case where the customer and the contractor are within the machinery of government.
I shall deal with employment at Devonport, where anxiety is plainly felt about the immediate consequences of the job reductions anounced last April. The Ministry of Defence is working closely with the local authorities to encourage local enterprise. We have joined Plymouth council in setting up the Devonport development unit. One of its first activities has been to promote opportunities for defence subcontract work at an exhibition attended by firms from the south-west. More than 150 firms contacted the Ministry of Defence, with the result that a number of firms have been invited to tender for local purchase orders, and some have been successful. In addition, we are reviewing holdings of land in the area to see what land can be made available for industrial development.
The consequences for local employment are much less severe at Rosyth, as the work load of the dockyard is increasing. The Government's commitment to Rosyth is clear from the massive investment that they are making in the dockyard to carry out Trident refits. I would take the Opposition's concern about unemployment at Rosyth far more seriously if they were not firmly committed to abandoning our only independent deterrent. If I were a worker at Rosyth dockyard, contemplating the future, I would be much more worried—[Interruption.] The Opposition clearly do not like the point that I am about to make. I should be more worried about the Labour party's defence policy being implemented than about the possibility of commercial management being introduced. The Opposition know that that is true and that it is the view of many of the workers at Rosyth.
Throughout the Government's consideration of the future of the dockyards we have been guided by the need to do nothing which would endanger national security. That concern has been uppermost in the Government's mind in both the nuclear and conventional spheres. The decision to introduce commercial management into the dockyards was endorsed by the Navy Board. Ministers do not sit on the Navy Board. The decision that was taken was the preferred option not just of Ministers but of the Royal Navy. The Navy Board believes that national security will not be put at risk by the proposals.
Successive Administrations have proposed changes in the dockyards, but attempts to introduce change have come to nothing. Suddenly the Opposition are again endorsing proposals which they did not carry out when they were in government—proposals which have not worked in the past. Now is the time to make decisions about the matter. Devonport and Rosyth have served the Royal Navy and the country loyally for many generations and their long-term future is assured under the Government's proposals. The Government remain convinced that the introduction of commercial management, with the assets of the dockyards remaining firmly in Government hands, will provide a real spur to efficiency and savings which competition and renewable contracts will bring. The dockyards badly need those things. They will ensure that the operational requirements of the fleet are met, and will continue to be met, and that the strategic interests of the country are safeguarded. I commend the Bill to the House.

Mr. Denzil Davies: The Minister and his colleagues have not argued the case for commercial or agency management of the dockyards. They have made various assertions about how much better such management would be, but no case has been put forward to prove that the dockyards would be more efficient in terms of the service that they give and will continue to give to the Royal Navy. The Minister's figures for savings are not illustrative but illusory and have no meaning whatsoever.
I echo the comments made by my right hon. Friend the Member for Blaenau Gwent (Mr. Foot). I accept that Ministers have to go abroad and attend important NATO) meetings, but—and I intend no disrespect to the Minister of State—the Secretary of State should have opened the debate. It may not have been necessary to have the debate today. It could have been put on at a different time. The Bill has only four clauses, and I do not suppose that it will last more than six months in Committee at this rate. Matters could have been arranged to enable the Secretary of State to be here to argue the case in respect of a substantial change that will affect the Royal Navy and thousands of dockyard workers in Devonport and Rosyth.
The Minister made it clear that tonight we shall be voting on an enabling Bill for commercial and agency management of the dockyards. We shall not be voting for some kind of Government-owned company. That is the fall-back position in case the Secretary of State cannot find any contractors. We shall be voting for commercial management. I hope that Conservative Members who have anxieties about the matter will realise that that is what they will be voting for and that that is what they will have to debate in Committee.
The Bill, especially the proposals behind it, is one of the most ill-prepared, poorly researched and irresponsible Bills which even the present Government have introduced over the last six years. The franchise or agency system —call it what one will—may be all right for fast food or other private establishments, but it is not suitable for complex organisations such as the royal dockyards.
The main duty of the dockyards is to maintain the ships of the Royal Navy to the highest state of efficiency and readiness. The Opposition believe that the proposals will do harm to the Navy and damage the livelihood of the thousands of dockyard employees who have served the


Navy and the nation with skill and dedication in war and peace. They will be shabbily treated if the Bill becomes law. The Bill will also damage the communities of Plymouth and Rosyth which are so dependent on the royal dockyards for their existence and economic future.
The main motivation behind the Bill is the Government's ideological belief and commitment. The motivation is not first and foremost the well-being of the Royal Navy. In one respect the Government's belief and commitment will be fulfilled if the Bill is passed, because the Secretary of State will be able to show the Prime Minister what a good boy he has been by removing by monthly reductions almost 20,000 civil servants off the books of the Ministry of Defence. That, of course, will have no effect in the real world as they will still have to be paid out of resources provided by the taxpayer.
The Secretary of State wanted to go much further—to remove the dockyards lock, stock and barrel. He wanted to remove the labour, capital, assets, land and everything else. He asked Mr. Peter Levene to look into the matter, but even Mr. Levene in his report, which I can only describe as cavalier and hasty, balked at the enormous problems which would have been caused by selling off the whole of the royal dockyards. As a result, the Secretary of State has produced a botched-up scheme in which the capital and assets are apparently to remain in Crown ownership, but their use is to be provided for and given to some private contractor and, as usual, the workers will be sold out. Most of the work in the first few years—the Minister has not answered this point—will be within the monopoly of a private contractor. There will be a tender for some of the core work, but I challenge the Minister to say what percentage of all the dockyard work in the first few years will be subject to tender and what percentage will be determined by negotiation between the Navy and the private monopoly contractor. The Navy would be in an extremely difficult position to negotiate contracts with a contractor holding a pistol to its head.
A remarkable feature of the Bill is that hardly anyone outside the Ministry of Defence has a good word to say about it. The Minister mentioned the Navy Board, but I get the impression that much of the support within the Ministry of Defence, and certainly much of it in the higher ranks of the Navy, has a touch of the press gang about it.
Agency management is not a new idea concocted by Peter Levene. As the Minister well knows, it was considered and rejected in 1970 by a committee chaired by Sir John Mallabar. In paragraph 103 of part II of Cmnd. 4713, reference is made to two possibilities for agency management. I shall refer only to the first, that
the Government could retain ownership and turn the enterprise over to commercial management".
That is exactly what is now proposed. Paragraph 104 states:
We feel we must dismiss the first of these two almost out of hand. The agency factory arrangement has, we know, been used fairly extensively in times of war emergency but those of us who have had direct experience of its working are satisfied that this is the way to get the worst of both the commercial and the Government Department worlds. We would certainly not recommend it for the dockyards.
That is a clear statement by people who had experience of operating agency management, although that experience was confined to factories.
A dockyard is much more difficult to run than a factory. It is far more complex than almost any armaments factory which could be run by agency management. Members of the Mallabar committee who had direct experience of the system clearly stated that it was not the best system either for dockyards or for factories. Mr. Levene, who doubtless has much experience of arms bazaars and arms selling, has very little experience of dockyard management. No one in the Ministry of Defence has the experience of the Mallabar committee in relation to agency arrangements, yet the Government apparently intend to go ahead with their scheme in the face of all the direct evidence provided for the Mallabar committee.
In July 1985, the Select Committee on Defence, in its fourth report, had little good to say about the Government's plan. Without being patronising, I believe that the House owes a debt of gratitude to the members of that Committee for the clarity of analysis and the non-partisan way in which they approached this very difficult subject. It is clear that they were not convinced by the evidence provided by the Government. The report concludes that the Ministry of Defence has not begun to tackle the potential difficulties and that the Government have failed to show that commercial management outweighs the advantages of a trading fund.
The Ministry of Defence was given a further opportunity to provide more evidence, but again it failed to do so and the Select Committee, in its further observations published on 27 November, pointed out that, despite all the objective evidence and all the evidence provided to the Mallabar committee and to the Select Committee, the Government were apparently determined to go ahead with an ill-considered scheme which will damage the vital interests of the nation and of national security.
The Select Committee was absolutely right to say that the Government had not considered the consequences of the scheme that they had outlined. There was evidence of that fairly recently when the Government produced a document to the trade unions—it was not a secret or confidential document—stating that 19 working groups were to be set up to look into the consequences of a decision which had been taken mainly on commercial grounds. The subjects involved show the extent of the problems and complications that will arise but which the Government did not consider before deciding on their proposed course of action. Working group No. 3 will consider
the manner in which Naval Base estate and facilities will be made available to the commercial operators
and also nuclear safety. Working group No. 4 will be concerned with
the overall organisation of the Naval Bases".
Working group No. 7 will deal with occupational health and safety. Working group No. 10 will be concerned with naval manpower. Working group No. 16 will deal with security. I should have thought that the Government would consider the consequences of those matters before deciding whether this was the best way to run the royal dockyards.
Not only has there been no support for the Government scheme from any of the impartial evidence at home, but there is no evidence from abroad to support it. On 17 April the Secretary of State tried to give a misleading impression to the House—I do not say that it was deliberate, but it was certainly misleading—when he said that his


proposals were based on American experience. That is wholly wrong. The United States dockyards, which are far more complex even than ours because the United States navy is so much larger, are not operated on an agency or commercial basis. They are operated according to a commercial trading fund of the kind that we should like in the future for the dockyards of this country. We can find no evidence that any other navy in the Western Alliance and certainly in Western Europe would consider taking the course that the Government now propose. The French certainly would not dream of it. Nevertheless, despite the internal and external evidence, the Government apparently still intend to go ahead.
The Government recently published a booklet entitled "The Future of the Dockyards". No doubt the people of Rosyth and Devonport will find that an ironic title. In that document the Government set out the two main objectives of the scheme as
enhancing the fighting effectiveness of the Fleet and preserving vital strategic interests
and
securing maximum value for money".
None of us objects to any of those aims, but we do not believe—the Minister has not argued the case at all—that the changes will enhance the capability, fighting effectiveness or readiness of the fleet or that they will save any money whatever.
With regard to the enhancement of the effectiveness of the fleet, no one has said in evidence to the Select Committee or in the House that the changes will make the fleet more effective or more ready to meet difficulties and problems in times of emergency. Is the Minister suggesting that the way in which the dockyards operated in the past was to the detriment of the fleet and that the effectiveness of the fleet was impaired as a result? Only a few years ago, management and employees proved themselves in the ultimate test in time of war. Is the Minister really saying that if Balfour Beatty or Trafalgar House had been operating the dockyards they would have performed better in the Falklands war? Three years later, there is to be an enormous upheaval when there is no evidence whatever that the dockyards have ever failed in their primary duty of ensuring the readiness and effectiveness of the fleet.
The question of foreign ownership is very important in terms of the need to safeguard strategic interests. The Minister may have answered some of the questions, but I hope that he will make three points absolutely clear. First —he may already have hinted at this—will he state categorically that only British-controlled companies will be allowed to tender? I accept that it is not always easy to define control in this area, but will he assure the House that only companies controlled by British residents will be allowed to tender? That is a fairly easy question to answer, and I expect the Minister to say yes.
The Minister has said that, first, an operating company will be formed. Presumably the shares of that company will be owned by Trafalgar House or some other parent company that is not solely engaged in dockyard activities. What plans do the Government have to ensure that the operating company and, subsequently, the parent company do not fall within the control of foreign ownership? We know what happened to the golden share; we know what happened to British Telecom; and we think we know what will happen to the royal ordnance factories. Will the same proposals apply to Trafalgar House? If 15

per cent. of the shares of Trafalgar House are bought by foreign shareholders, will the contracts between the Ministry of Defence and the subsidiary of Trafalgar House be terminated? The Minister has not mentioned that. It is not in the Bill. I hope that the Minister will make it clear that foreign ownership of the operating company will not be allowed.
We have been told that 30 per cent. of the dockyard work will be put out to tender. Will the Minister make it clear that the tender will not be allowed to go to any foreign yards—that only British yards will be allowed to tender for that 30 per cent.?
We do not believe that the proposals will enhance the effectiveness of the Navy or save money. The evidence to the Select Committee shows that it was the hope of saving money that led the Navy Board reluctantly to acquiesce in the proposals. In paragraph 408, Rear Admiral George makes that point quite clearly:
I think we are in an area of speculation.
That is absolutely clear. He continued:
It is largely the pressure on the defence budget which has led the Admiralty Board to consider matters of saving money in that area of support.
The acquiescence of the Navy was obtained because it believed that money could be saved, not because the plans would enhance the effectiveness of the support services or the effectiveness and readiness of the fleet.
It has been said that between £24 million and £26 million will be saved. The figures have been put out with a precision that makes us suspicious. The Minister has said that, whatever illustrative figures are used, he does not know how much money will be saved or, indeed, whether any money will be saved. The 24th report of the Public Accounts Committee made this point clearly when it stated:
On the basis of information supplied to us, we have misgivings about the thoroughness and accuracy of the Ministry's costings.
Later, it was said, in effect, that the calculations provided no valid basis to judge whether any materially increased efficiency attached to the Government's preferred option. The Select Committee made exactly the same point. Even if these figures are correct—and I do not think they are—why go through this upheaval to save about £24 million when the turnover of the dockyards is between £400 million and £500 million a year? It does not seem worth it in terms of morale and the effect it will have on the Navy and employees. We do not believe that the plans will save money or that they will enhance the operation of the fleet.
The Minister has said that the tender— an area of considerable difficulty and obfuscation—will be for the core work. I challenge him to say that the tender will be based upon figures for over 50 per cent. of the work carried out in the dockyards. Some people have said that the tender will relate to 5 per cent., 7 per cent. or perhaps 10 per cent. of the work for only the first few years and that once the tenderer has the contract on the basis of 10 per cent., he will be given extra work—up to 70 per cent. of the total core work. The Minister should tell us how he defines core work. He did not define the work to which he alluded when he spoke about the percentage of work that would be tendered for by private contractors.
We are concerned about more than the core work that is carried out in the dockyards. Dockyards also carry out what is called emergent or unprogrammed work—in other words, work that is found when a frigate is opened


repairs or refitting. An example is the work that ensued when builders came to my house to carry out a conversion and discovered dry rot. How are the prices to be arranged? How can the tender apply to work that nobody knows is needed? Will a frigate be left standing while negotiations continue between the Navy and a private monopoly supplier?
These considerations are especially important when nuclear submarines are involved. I am told that there are great difficulties when nuclear submarines are refitted or repaired. Apparently it can take months to get all the authorities to deal with the problems that arise with nuclear reactors and nuclear submarines. Will this work be determined by negotiation between a private supplier, who has a complete monopoly, and the Navy, which, in effect, will have a pistol held to its head to accept the price quoted by the supplier without any recourse because it needs the frigate or submarine to be refitted or repaired?
Does the Minister say that it is possible to arrive at a price for emergency work before the work is done? The Levene report made this issue quite clear. Paragraph 3 of this famous leaked report states:
I also found that the lack of the normal market forces meant that the dockyard undertook a wide range of what in commercial terms are almost certainly uneconomic activities.
That is right, for the dockyards do, in commercial terms, undertake uneconomic activities. The object of the Bill is to ensure that these activities are carried out on a commercial basis by private contractors. It will cost the Navy more if those activities are carried out on a commercial basis. What percentage of the dockyard work will be subject to competition and what percentage will be determined by negotiation between the monopoly supplier and the Navy, which will be a capital consumer?
The Mallabar report recommended that a trading fund should be set up for the dockyards. We know that the United States navy operates through a trading fund. The old Expenditure Committee of 1975 also recommended a trading fund for the dockyards. The report prepared by the hon. Member for Ashford (Mr. Speed), when he was the Navy Minister, recommended a trading fund for the dockyards. The Select Committee on Defence, although it has not exactly said so, favours the concept. The right hon. Member for Spelthorne (Sir H. Atkins) shakes his head. The evidence available favours a trading fund over what the Government have suggested.

Sir Humphrey Atkins: The Select Committee was careful not to make any recommendations. If the right hon. Gentleman reads the report again, he will find that that is so. With respect, he is not entitled to say that the report favours a certain course.

Mr. Davies: I did not say "recommendation". I accept entirely what the Chairman of the Select Committee, the right hon. Gentleman, has said, but I am entitled to submit my interpretation of the two reports. It seems that, in the light of the evidence, the Select Committee favours a trading fund, not commercial management. The trade unions favour a trading fund, as do most external reports.

Mr. Sayeed: The right hon. Gentleman has prayed in aid the Mallabar report. Perhaps he will tell us why the then Labour Government did not implement its proposals.

Mr. Davies: I have no idea; and I have no idea why the Conservative Government of 1974 did not either. The

hon. Gentleman will recall that a Conservative Government were elected in 1974. That Administration could have put into operation the recommendations of the Mallabar report. The hon. Gentleman has not made a very sensible point.
The Minister was scathing about trading funds and suggested that they are terrible things, but it is possible to obtain commercial accounting and management by means of a trading fund. The Minister will recall the debates that took place last year in Committee on the privatisation of the royal ordnance factories. The ROFs have operated for some time on the principle of a trading fund and have made large profits. The profits were so large that the Secretary of State decided that he could sell off large chunks of them on the stock market and obtain a great deal of money for them. I shall be interested to see whether they are as successful when they come under private ownership as they were when they operated as a trading fund.
The Royal Mint has been operated as a trading fund for a number of years. In 1971 the Government introduced the Atomic Energy Authority Bill, which now enshrines in statute the concept of a trading fund to run the authority. There is no reason why commercial management and the freeing of constraints on management should not be undertaken by means of a trading fund Bill or by setting up a trading fund. If some changes are needed to the Government Trading Funds Act 1973, let us make them.
As I have said, it is possible to run the dockyards in a manner that frees them of commercial constraints and in the interests of the Royal Navy, not those of private shareholders. It is possible to achieve all the changes that we want to see by means of a Government trading fund.
The Opposition believe that the Minister of State should take away the Bill. He knows in his heart that it makes no sense. Indeed, he knows that the Bill is nuts. He knows that it is wrong and that it will not work. He knows also that it is not in the best interests of the Royal Navy or of the people who, at the end of the day, the Government will need to operate the dockyards in times of war and peace. That is why the Minister should take away the Bill. Instead, he should establish a trading fund. We could then introduce the necessary changes.

Miss Janet Fookes: I hope that I shall not be considered parochial if I do not direct my immediate attention to Rosyth. I am sure that there are hon. Members on both sides of the House who will be glad to take a more detailed interest in that yard. I suspect that what I say about the dockyard nearest to my constituency will apply also to Rosyth.
As one of the three hon. Members representing Plymouth, I have a deep and local interest in the Bill. I do not pretend that the worries of my constituents and of the other citizens of Plymouth are not foremost in my thinking. It is right and proper that a constituency Member should have those worries closest to the heart.
I appreciate that we are considering a major defence establishment which has the vital task of servicing Royal Navy ships and carrying out repairs and refits. There is, of course, a major national interest in that activity. Therefore, I have to take into account both a local and a national interest. I hope and believe that there need be no conflict between the two. However, I must tell the


Minister that I have serious reservations about the course on which the Government are embarked, which has been confirmed this afternoon.
I accept, along with other individuals, organisations and Select Committees, the need for some change in the organisation of the dockyards. In saying that, I am paying no disrespect to the work force, which can only be as good as those who lead it and the system under which it has to operate. Given those circumstances, the work force has done a good job in the past and will, I am sure, continue so to perform in future.
I accept also that the present system leaves much to be desired. Some of the shortcomings go back even further, perhaps, than the Mallabar report. It is instructive that the Mallabar committee was set in motion by a Labour Government. When the right hon. Member for Llanelli (Mr. Davies) inquires why the Conservatives did not implement the changes that it recommended in 1974, I must remind him that that Conservative Government were in no position to do any such thing. He will recall that the Conservatives lost both elections in 1974. I for one have good reason to recall the October 1974 general election with the utmost vividness. However, that is water under the bridge. I believe that there is a case for change and that what really matters is the format of the change.
I have been disturbed by the short period of consultation to which my hon. Friend the Minister referred briefly. It seems that virtually a year was wasted—in any event, it was not spent profitably—between the leaking of the Levene report and the announcement which was made by my right hon. Friend the Secretary of State in April of this year. That could have been a year spent usefully at greater leisure, whereas in the event we had exceedingly rushed consultation and great difficulties for all concerned. I am not in the least surprised that many of my constituents, dockyard workers and others, were led to the conclusion that the consultation was a mere pretence, a mere mockery, and that a firm decision had already been made. I share that view somewhat, even though my own Government were thus engaged.
Now that the Bill is before us, we shall have a further opportunity to consider in detail what is on offer. However, there is a difficulty in the format of the Bill as it is enabling legislation and has been drafted with a broad brush. Accordingly, it allows for several different possibilities. It is not too much to say that many of the key decisions will be taken independent of the course of the measure. These decisions will have a major bearing on what finally happens about the organisation of the royal dockyards.
I am glad that the Minister has put it on the record that conditions of service, especially pension rights and redundancy payments, will not be affected adversely by any change. When people are worried and disturbed about their future, as many are in Plymouth, it is easy for them to be worried unnecessarily. I hope that my hon. Friend's remarks will be widely disseminated and, if necessary, repeated again and again so that at least those involved will have no worries about the basics of their employment.
Perhaps it is not sufficiently understood outside the west country how large a place the dockyard occupies within the economy of Plymouth. The dockyard is by far the largest employer in the area, as well as the oldest. It has a history that spans several hundred years. Any changes in the organisation of the dockyard will send ripples through the 12,000 or 13,000 members of the work

force and have repercussions beyond that will affect all those who work in the yard, or who hope to work there. The same can be said for their families. It should be understood that Plymouth is undergoing a traumatic experience, which is not limited to the immediate confines of the city. I see my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) smiling his acceptance of that. This matter is of the utmost importance for Plymouth and the surrounding area. Nothing else has caused so much anguish and excitement during the past month since the changes were announced, leaked or otherwise brought to public attention.
I pay tribute to the changes already in hand. at the dockyard under the leadership of the managing director. I have the highest regard for Mr. David Johnson, the present managing director, who is giving an excellent lead to the work force at a time of the greatest difficulty and worry. Progress is being made in dealing with the worries that have been expressed about absenteeism, the excessive overtime worked and slippage in refit and repair work. There have been notable improvements. It is right that tribute should be paid to Mr. Johnson and to the work force for their co-operation during these difficult times.
I wish to discuss the formula of the Bill. I am somewhat dismayed that the Government are so set upon the commercial option—the preferred option as it is called in the consultation document. I have stated publicly, and I state now, that, although changes outside the Civil Service are necessary, I dislike the commercial option. I infinitely prefer the more proven method of forming a public limited company. We could then be more certain that those running the company had at heart the interests not only of the dockyard but of the local work force and local economy.
One drawback of the option favoured by the Government is that which the Minister puts forward as an advantage—the possible change in contractors because of the limited period, originally of five years but now extended to seven years. My hon. Friend must understand that for those who live and work there, that is only a short time. So there is always an element of uncertainty. Most human beings, and I include myself among that majority, dislike uncertainty. It is unsettling, nerve-wracking and worrying. There is bound to be uncertainty because of the competitive edge syndrome with which the Government are flirting.
If the Government cannot change to the plc fallback position, which is my preferred option, I hope that they will take up the option mentioned by my hon. Friend the Member for Bexleyheath (Mr. Townsend) and go for the 10-year period rather than seven years. At the outset, that would provide employees with a little more sense of permanence and set their minds at rest more than the seven-year period would. That is a second-best option, but I am realistic enough to appreciate that, in all probability, the Bill will go through. It allows the Government to take either option. If the Government go ahead with the commercial option, I ask that a longer period be seriously considered.
I pray in aid the fact that the plc is a far better method of achieving what the Government and I want: a dockyard operating at maximum efficiency with proper safeguards for those who work and do a good job there. I do not understand why we must choose an unproven formula when a more obvious option is available to us. I accept the need to go beyond the trading fund, which the right hon.


Member for Llanelli does not wish to do, but I fail to understand why we cannot have a proven formula rather than an untried one.

Mr. Douglas: I am intrigued by the hon. Lady's argument. Where in the world does the proven formula of a Government wholly-owned plc operate for the refit and maintenance of naval vessels?

Miss Fookes: I did not suggest applying the formula to the repair of vessels. I meant it as a legal entity which was well known and understood. I am sorry if the hon. Gentleman misunderstood me.
When the consultation period was announced, the city of Plymouth. which has an obvious interest in employment prospects and the prosperity of the local economy, was moved to employ the famous firm of accountants Peat Marwick Mitchell and Company, which operates internationally, to undertake a rapid inquiry into the options available. It had to be rapid because of the time scale of the consultation. The report, which was made in record time, is a worthwhile document. I am sorry that the Government have not given it the serious consideration that it deserves. Page 66 of the report sets out briefly the firm's views on each of the main options. On the trading option, the report states:
Easy option to implement with prospects of some early efficiency gains, but longer term benefits and contribution to local economy could be severely limited by constraints on management freedom.
On the public corporation or Government-owned company it states:
Option providing the best prospects for progressive improvement in efficiency with diversification and contribution to the local economy, providing adequate management freedom can be arranged.
On the commercial or agency management approach—the Government's preferred option—the report states:
An experimental approach which would be difficult and costly to implement and administer, and which offers uncertain prospects for the local economy.
I listened carefully to my hon. Friend's opening remarks and I shall listen attentively to his concluding remarks, but nothing in his statements so far comforts me when I read the conclusion of Peat Marwick, which is a commercial firm of the utmost repute and standing. I ask that the Government reconsider their chosen option. Nothing in the Bill prevents them from doing so because the Bill provides that they can choose either option. That makes it more difficult for me as I prefer one option. But both are in the Bill, and I can be guided only by the Government's declaration of intent.
I hope that during the remaining stages of our consideration of the Bill we shall have additional information about precisely the contract that the Government have in mind and more details about those firms that are, or may be, seriously interested. There is a belief in Plymouth that the number of serious contenders is decreasing rapidly. If that is the case, considerable doubt is thrown on the commercial option chosen by the Government. I await that with interest, but in the meantime I must decide how to vote tonight. I am not satisfied with the case made by the Government for their preferred option, although I accept the need for change. In those circumstances, unless the Minister gives the House some new information tonight, I cannot consider supporting the Bill.

Dr. David Owen: Many of those who voted for the hon. Member for Plymouth, Drake (Miss Fookes) will hope that her views on the Bill will lead her into the Division Lobby to vote against it. That would be a more accurate reflection of the feeling in Plymouth of let-down and, indeed, of anger over this legislation.
It is extraordinary that the Secretary of State for Defence is not here today. We understand that he has commitments with NATO, but since the business of the House is the responsibility of the Leader of the House, it should have been perfectly possible for him to arrange the debate for a day when the Secretary of State did not need to attend a NATO meeting. Since the legislation owes its inception and design almost solely to the Secretary of State, it is even more insulting that he is not here to justify it.
The Bill has attracted an extraordinary amount of hostility from hon. Members on both sides of the House. I have been in the House for nearly 20 years, and I cannot remember a Bill that was so extensively mauled and savaged by two all-party Select Committees. The all-party Select Committee on Defence has twice raised grave doubts about whether the legislation will safeguard the fighting efficiency of the Royal Navy. The Public Accounts Committee, which is commonly regarded as the most authoritative and independent of the Select Committees, has not only called in question the scheme, but has mentioned the probability that its implementation will cost the naval budget substantially more during the next four to five years than would one of the other options.
The SDP believes that the best option—the one that should have been implemented a long time ago—is the trading fund run by the Civil Service. Many workers and trade unionists in the dockyards have long wanted the separation of their accountancy and financial operations, because they have been all too conscious of the difficulty of comparing their work, which they believe to be efficient and cost-effective, with outside industry. They have always had to carry the vast overheads of the naval bases. Therefore. there is no sizeable opposition to the idea that we should have a separate trading fund and then judge the dockyards' efficiency on its merits.
The Bill is not privatisation; it is piratisation. The Government have decided to privatise a national asset that has served the country well for centuries. That is the Government's philosophy. Have they used such a scheme in any previous privatisations? The answer is emphatically no. Did British Telecom, will British Gas, or did any of the privatisations involve the control of assets by the Government, but the separation of those assets from the work forces and managements?
Does any hon. Member who operates a commercial company genuinely believe that he could separate the investment and assets from the management and work force of his company? No industrialist, apart from Mr. Levene, has publicly advocated that course.
The independent firm of accountants, Peat Marwick Mitchell and Company, castigated the scheme and demonstrated that it was not an effective way of running a commercial organisation. Since the idea was floated, I have talked to a vast number of industrialists. They have all reached the conclusions that were reached in the Mallabar report. They dismissed the scheme, because they have run companies and know that it cannot be done.
The fatal flaw of the legislation is the belief that we can separate the assets from the management and the work force. What is so tragic about the Government's decision is that one of the problems in the dockyards in the 1960s was the neglect of their assets. When I was a Minister dealing with the dockyards, the then Labour Government made certain from 1969 onwards—it continued under successive Governments through the 1970s and 1980s—that there was a massive injection of resources into the dockyards to give them the capital assets that they needed. Of course, the Secretary of State cannot privatise the entire dockyards, because no one could find enough money to buy their vast capital assets.
The managers of the new company that will be set up under the Government's preferred option will be given seven-year contracts which must, by their nature, be from time to time broken. If contracts are continued in perpetuity, the purpose of the Bill as set out by the Minister will be thwarted. If there must be competition, it must be shown to be effective competition. That means that the company which employs those men as well as manages the dockyards will, at least after the fifth year, operate under the question mark of whether its contract will be renewed. If it is not renewed, a new company will be asked to take on the existing work force. However, there can he no guarantee that it will take on that work force, unless the Ministry of Defence tells us that such a guarantee will be part of the contract. One reason why the Government cannot give a guarantee that the work force will be re-employed is that the tenders will be based on a work load to be allocated.
That is where this privatisation is uniquely different from previous privatisations. When someone was transferred from British Telecom into the new privatised company, he had a reasonable expectation that if he worked well and efficiently he would spend the rest of his days until retirement in that company. That is not the case now. No such continuity of employment can be offered. The contracts of employees can be terminated at the end of the management contract. That is an extraordinary method of rewarding people who have served the country for many decades. During the Falklands war, Ministers and all hon. Members paid tribute to the work of those employees.
The Bill will mean that the Government can strip off the dockyards' assets and control them, but there will be no integrated operation. The workers will be given no guarantee of continuity of employment and hanging over them at all times will be the question of the future work load. That will affect not only those employed in the dockyard, but the city or town in whose economy the dockyard is a crucial element. Problems will radiate into the travel-to-work areas surrounding Plymouth in Cornwall and Devon. The problems at Rosyth will be similar, although on a slightly smaller scale.
The Government must ask themselves for how much longer they can justify introducing such legislation simply because they have an in-built majority. At what stage in a democracy is it possible to restrain people from taking industrial action? At what stage can hon. Members demonstrate to people who are anxious and depressed about their future employment that they can trust the democratic process?
The consultation period was laughably short. We argued with our constituents and told them to trust the

process. We held a mass meeting in Plymouth—on an all-party basis—we rallied both Plymouth city council and the Devon county council who commissioned the Peat Marwick Mitchell report, we tried to keep the campaign on an all-party basis as far as possible and then we put in evidence to the Select Committees. Those Select Committees, on an all-party basis, criticised the Government. At what stage is it, in a genuine and true democracy, that a Secretary of State listens? I hope that the Secretary of State will read Hansard—it should not be asking too much of him. If he does, perhaps he will ponder the possibility that there has been an error.
The Secretary of State might then ask himself why anybody should take on this management contract. The people who may tender for the contract will tender for one reason only—they have substantial defence interests and for other reasons and other contracts wish to keep in with the procurement executive, and in particular with Mr. Levene. I have talked to some of the people involved, and they show no enthusiasm for the contract, for one major reason. They say that it will be hard enough to manage the dockyard, but to do it against a work force that feels that it has been bludgeoned into this and is resentful at the process, and which has already absorbed 2,000 redundancies, will be impossible. We should remember that this arrangement takes place only after Devonport has lost those 2,000 jobs by fiat from the Secretary of State. This is a pretty unsatisfactory management contract for anybody to take on.
In addition, as a reserve position, the Secretary of State has said that if nobody turns up to bid for a contract, because the terms on offer are so bad, he will consider running the dockyards, for an interim period, as a Government-owned plc, which is the preferred option of the hon. Member for Drake. On what basis does she prefer it—as a standby to tide over the Government until the election is over and a new contract comes in? That is not an option.
There is one different option for the Secretary of State, which is to say to the unions and the labour force in Rosyth and Devonport, "You do not like what I have introduced. This is the legislation that I want, but I am prepared to talk to see whether we can come to some new arrangement." The Secretary of State has ample reason for doing this, because it is recommended in the second report of the Select Committee on Defence. The reports ends:
We urge the Government to approach the debates on the Dockyards Services Bill with an open mind and a readiness to draw fully upon the opinions expressed from all quarters, in the best interests of the fighting efficiency of the Fleet and of the defence and security of the nation.
If the Navy Board, which was once the Admiralty Board, with which some of us were proud to be associated, cannot realise that it is embarking on a serious course in terms of endangering the efficiency of the Navy, it is time that at least the Minister did.
The Minister of State has been saddled with a thankless task. The Secretary of State drags him back from a foreign trip to deal with the matter and then walks away. In his previous incarnation the Minister showed himself to be not without any understanding about trade unions, unemployment and the fears of the work force. I challenge him: Why does he not talk to the trade unions and ask what they can agree together? I point out to the hon. Member for Drake that agreement on an interim measure with the trade unions could not be achieved. They will want to ensure, and have


a right to ask, that whatever comes out is permanent. There must be new permanent arrangements, even if they are not what I want—a trading fund within the Civil Service.
There are grounds for arguing for a Government-owned commercial company. The Government are obsessed with cutting Civil Service numbers, and will undoubtedly be able to take the dockyards out of the Civil Service through this method. However, the dockyards must be an integrated unit, a single unified company, which owns assets, manages the company and employs the work force, and in which the Ministry of Defence is the predominant and sole owner. If the Government wish to introduce worker shares, I should not be against that, but the Ministry of Defence must be the controlling interest in a company that operates commercially.
There would be some advantage for the unions in such a scheme. I have been involved in some of the negotiations in the industrial Civil Service, and I know of the difficulty in getting the Civil Service machine to recognise the dockyards as being an industry and to grant them a proper productivity deal. I know that the work force would be apprehensive about leaving the Civil Service, particularly white-collar civil servants who have previously been able to transfer to other parts of the Civil Service. They might be able to negotiate some transfer arrangement, It is not impossible for there to be far greater agreement than even the Minister of State might envisage, provided that the arrangement is permanent, honoured by both sides of the House, with no yo-yoing around from private to public ownership, a company owned by the Ministry of Defence, outside the Civil Service, run as an integrated operation, and permanent.

Miss Fookes: I do not wish to interrupt the right hon. Gentleman in the middle of his discourse, but I wish to make it clear that I am not interested in an interim arrangement either. When I suggested a plc as a possible formula, it was on a permanent, not an interim, basis.

Dr. Owen: That only goes to show that the hon. Lady should join us in voting against the Bill. On any interpretation of the Bill, as the Minister said, it will implement commercial management. Nothing has been said to give any sign that the Government are prepared to change the Bill so that it deals not with commercial management, but with the Government retaining control over a critical strategic asset of great importance to the Navy and the country. That is all that we ask.
I would regret it if the dockyard work force moved out of the Civil Service. This is a sad way to pay back the honourable record of service that we have all had from the dockyards' labour force. However, it is indefensible to continue with this mish-mash of commercial management, during which no guarantee can be given of a successful enterprise.
The history of this episode is important, so I shall remind the Minister of it because he may not have been briefed on it by his civil servants. After the hon. Member for Ashford (Mr. Speed) had been kicked out, the Government tried to ditch his report. If any of this had been promised in the 1983 election, the make-up of Parliament would have been different and the hon. Member for Drake might not have been here. Throughout

the 1983 general election campaign there was no glimmer of this plan. The election was fought on the basis of the Speed report.
After that report, the people in the dockyards were told that they must be prepared to see their work and efficiency checked against that of private industry. The unions did not like it, but they accepted it. They accepted a plan whereby a submarine and a frigate would go out to private contract, and a similar frigate and submarine would be refitted in Devonport, which was chosen because the ships were comparable. The exercise was set up as a fair and reasonable way to compare costs.
No sooner had the exercise been started than there was a leak from the Levene report. What integrity was involved in that arrangement? The trade unions were asked, in fair competition, to see whether they could compete with private yards. They accepted the challenge and were prepared to carry out the exercise, but suddenly the rug was pulled from underneath them and they were then faced with the Levene proposals. The exercise has still gone ahead. and I think that the Minister will find out what has happened in the past.
It is incredibly difficult to make a fair comparison between even two submarines that have been chosen for fair comparison. One submarine may be opened up to find that there is rust and that the electrics have gone, while the other may be perfectly all right, even though they are about the same age. Exactly the same may apply to a frigate. When its insides are opened up and problems are revealed, the private contractor will have to go back to the Ministry of Defence and say that its tender will have to be completely changed.
The dockyards are to the Navy what a garage is to those of us who have cars. We expect a garage to be ready when our car breaks down and to have the capacity to deal instantly with our problems. It is not possible to programme the cars all the way through, nor is it possible to programme all the naval ships. We tie up vast capital assets in the naval ships and it is in our, the Navy's and NATO's interests that those ships are turned around quickly when something goes wrong. In order to operate such a refitting dockyard, there must be the capacity to respond in emergencies. a certain degree of spare capacity and, above all, the good will of the work force. The work force must understand that it is in a high security business, dealing with classified documentation, serving the nation and the Navy, and it must be proud of doing so.
To smash all that for want of a readiness to get round a table is a tragedy. That is what the Bill will do. There will be no attempt to reach a solid agreement with some of the most reasonable men and women trade unionists in Britain. They are not mindless militants, but are some of the best people in Britain, and it is a tragedy that they should be treated in this way. Has the matter ever been discussed with them? No. Those hon. Members who are wondering which way to vote should remember that the proposals have never been discussed in any serious way with trade unionists. They have been presented to them as a fait accompli at each stage. The trade unionists have their preferred option. Some may not agree with me about a trading fund and would prefer other things, but they are in the business of negotiating. They are predominantly trade unionists. If the employer—the Secretary of State—asked them to see whether some agreement could be reached, he might well be surprised.
The Government have a massive majority. We all know that the Bill can be pushed through without a single amendment. There is no doubt about that, because in order for an amendment to succeed a Conservative Member must be ready to vote with the Labour and Social Democratic Members of the Committee. We are in the business of trying to sort something out of this frightful mess. Believe me, that is what it is. One has only to listen to the right hon. Gentleman speaking of the 19 working parties to know that, and many of those 19 working parties have already formed sub-committees. The whole thing is a complete farce. Has anyone considered the way in which the naval dockyards intermesh with the naval base and Government Departments?
I urge the Minister to do what the all-party Select Committee on Defence has urged him to do—to think objectively about this again. There is no better form of doing that than to discuss it around the table with some of the men and women who will have to implement the mess. He would be surprised how much good will would come from such consultation. Out of it we might be able to produce a structure for the dockyard that would last.
Most of us are terrified that we shall have doctrinal, ideological semi-privatisation for the two dockyards, both of which are immensley important. I have talked mainly about Plymouth, but the Rosyth dockyard, with the refitting of Polaris, could hardly be more important to Britain's security and future. We are terrified that the Government will give up the opportunity of getting something that could he endorsed, even with grudging acceptance here and there, by most people who work in the dockyards, and by most political parties, and that we would have a structure that would last into the next century. All that is in prospect at the moment is a bitterly contested political argument about the dockyards which will go on right up to and through the general election and will almost certainly be changed after the general election, all for the lack of a readiness to do what people in Britain ought to do—to try to reach an agreement, and, in particular, to involve people who work within the dockyard.
It is in that spirit that I urge the Minister to think again. It is in the spirit that this is a thoroughly bad piece of legislation which will do grave damage to the Royal Navy, to the fighting efficiency of the fleet and the long-standing commitment of people in the dockyards and to the Navy that we in the Social Democratic and Liberal parties will vote against the Bill tonight.

Mr. Robert Hicks: It is essential in any debate dealing with proposals to alter fundamentally the management of the royal dockyards to keep constantly in our minds two inter-related considerations which factually are not in dispute. They are simply that we are talking about Britain's defence obligations and our national security in particular, and, within that context, how best the dockyards can service the Royal Navy. That, after all, is the principal function and purpose of the dockyards.
There would be a general consensus that the performance of the royal dockyards has not been as good as one would have wished. However, that is not entirely due to the failings of the management or work force. The constraints placed on our existing system have contributed to the unsatisfactory situation. Consequently, in recent

years, as many hon. Members have said, there have been a series of investigations and reports, the most recent of which are the Mallabar, Speed and Levene reports.
As someone who has lived all his life within the Plymouth area and who has therefore been related to many of the work force in the dockyard, what interests me is that if, during the course of the past 15 years, two reports have recommended the introduction of a trading fund concept and rejected the concept of commercial or agency management, why, within the course of the past two years, has there been a fundamental change of outlook?
There is general acceptance that there are three specific areas in which changes are essential if the dockyards are to operate with greater efficiency. First, as has already been mentioned, the dockyards as suppliers should be clearly separated from the Royal Navy as the customer. We are all aware of the inherent problems that arise from that unsatisfactory position. Secondly, most hon. Members would agree that local managers should have greater authority and freedom to manage. Thirdly, most people would take the view that accounting procedures reflecting normal commercial practice should be introduced so that performance within the royal dockyards can be properly assessed.
Let me recall the sequence of events in order to put my observations into context. In April my right hon. Friend the Secretary of State for Defence published his consultative document. In it were the three options. They were, first, full-scale privatisation; secondly, the introduction of the trading fund concept; and, thirdly—the preferred option—the imposition of some system of commercial management. I argued at the time for the establishment of a trading fund with the work force either inside or outside the Civil Service. In practice, the latter structure would have been possible.
It is relevant to emphasise, as was pointed out by my hon. Friend the Member for Plymouth, Drake (Miss Fookes) and the right hon. Member for Plymouth, Devonport (Dr. Owen), that immediately after the publication of the consultative document a local steering group was formed. It consisted of local authority members, both at county and district level, representatives of the trade unions and a number of other interested parties and organisations, including the four local Members of Parliament who are most involved. A report was commissioned by the accountants, Peat Marwick Mitchell and Company. In his summary Mr. Roger Harris of Peat Marwick said that he felt that the Government had not given due justice to the potential merit of adopting a public sector, non-Civil Service option. He was also critical in his report of the Government's preferred option.
I have always hoped, and have expressed his view locally in public, that some solution might emerge that would unite the existing management and the local work force. I have expressed the hope that, based on these twin props, a consensus would be evolved which would go some way towards satisfying the three criteria that were laid down by the Secretary of State in his consultative document but which would retain the dockyard work force entity of management and employees as we know it.
I make no apology for mentioning specifically Devonport. I have already referred to the fact that I have lived in the vicinity all my life. It is worth spelling out, as this is fundamental to the Government's proposals, that Plymouth, south-east Cornwall, south-west Devon and the Royal Navy dockyard are closely integrated and


interdependent. Performance at Devonport under its present management improved significantly during the past two years. The efforts of all concerned during the Falklands dispute have, rightly, been universally acknowledged. In addition, comparisons with the private sector relating to the refitting of ships and submarines are favourable to the dockyard in terms of quality and timing. However, the Government have ignored all the advice and criticism. They have also ignored the majority of the recommendations that they received in response to their consultative document, including those from the Select Committeee on Defence and the Public Accounts Committee. Both of those Select Committees questioned the projected financial savings, on the basis of insufficient evidence. The Select Committee on Defence also outlined the various difficulties inherent in any commercial management option.
These criticisms—the problems that will be created through the introduction of this form of commercial management and doubt about the savings that it is claimed will be made—have not yet been satisfactorily answered during the debate, in exchanges in this House on previous occasions, or in the response of the Ministry of Defence to the Select Committee's initial report. I understand that the Select Committee on Defence is now worried about the enhanced uncertainty factor. This point is relevant, bearing in mind what I said at the beginning of my speech—that this debate is about the future system that should be adopted for servicing the Royal Navy which plays such an important part in the defence of this country.
My hon. Friend the Minister of State outlined the changes to the Government's proposals after the publication of the consultative document. Operating companies are to be established which will enter into contracts with contractors for a period of seven years. At the end of the seven-year period there will again be uncertainty. I want to put to my hon. Friend the Minister of State a question that increasingly is being asked. He was not over-optimistic when he referred to the number of potential contractors who may be in the pipeline for the Devonport contract. One of the bases upon which he presents his argument for a fundamental change in the administration of the royal dockyards is that a more competitive edge will be introduced which will result in the dockyards being more cost-effective and providing a better quality of service. If, however, no contractor comes forward, or if the terms are unacceptable to either side because of the uncertainty, we are entitled to ask what will happen.
The Bill contains what I interpret as a fall-back clause if unforeseen circumstances should arise. I do not regard the reference to a Government-owned company as a permanent option. It is an interim measure. If we were obliged to introduce it, it would lead to greater uncertainty over an extended period. All of those who are concerned about the defence of this country, the future of Devonport dockyard and the impact of these measures upon the local economy are entitled to a response from the Government.
The separation of the management and work force will destroy the entity of the dockyards. I have already referred to the fact that there has been an increase in uncertainty. Those who are employed in the dockyards will feel less

certain about their future. This in turn will lead to a reduction in the ability of the work force. In other words, their worries will be manifested in the work that they do.
Almost 13,500 people are employed at Devonport dockyard. We know that during the next 18 months to two years that number will be reduced by about 2,000. Devonport is one of the five largest single-site operations in the United Kingdom. It should not be forgotten that, in addition to the 13,500 employees in the dockyard, at an adjacent site almost 5,000 additional people are always employed by the Royal Navy base. Therefore, the total Devonport presence is almost 19,000.
I am worried about the economic and social implications of the Bill for Plymouth and south-east Cornwall. I have deliberately refrained from concentrating on local aspects, important though they undoubtedly are. However, I wish briefly to remind the House that the area of south-east Cornwall that I represent already has 18 per cent. unemployment, it already has assisted area status and average earnings are 18 per cent. below the national average. Therefore, the House will understand why I and the great majority of my constituents could do without any further traumatic experiences in the near future.

Mr. Stuart Randall: Which way will the hon. Gentleman vote?

Mr. Hicks: When the hon. Gentleman has been here a little longer, he will not make such inane comments.
I return to my central theme, which is the defence and security of this country. In particular, we are considering the servicing of the Royal Navy, and that is an important ingredient. We are being asked to agree to what I have previously described in the House as a speculative, non-proven system. There is no comparable economic model anywhere in the world. The arguments deployed by the Secretary of State and his Ministers in support of the proposal are unsubstantiated. There is a total absence of clear, tangible evidence—

Mr. Maxwell-Hyslop: And the total absence of the Secretary of State.

Mr. Hicks: My hon. Friend is right.
In the absence of any known arrangements that could win the confidence of the work force and provide the required managerial expertise, I am not prepared, at this stage, to risk the defence of our nation for dubious financial savings. I shall vote accordingly.

Mr. Dick Douglas: I and my colleagues serving on the Select Committee on Defence have laboured long, but not too wearily, with the contents of the Bill. I do not want to weary the House with the chronology of the background to the Bill. Those points have been made well by my right hon. Friend the Member for Llanelli (Mr. Davies) and by the right hon. Member for Plymouth, Devonport (Dr. Owen). Suffice it to say—and in the absence of the Chairman of the Select Committee at this point—that there was a brief interchange between the Chairman and my right hon. Friend about the Committee's conclusions.
There is often some dispute about the conclusions that a Select Committee may reach, especially when it has a preponderance of Government Members. However, I challenge anyone who heard the evidence given to the


Select Committee on Defence—as I did—to do other than conclude that the evidence was overwhelmingly against the Government's preferred option.
On the first occasion that it considered the matter, the Select Committee made it abundantly clear that the Government had failed to prove their case. On the second occasion, perhaps wrongly, I exchanged views with Vice Admiral Tippet, who, quite rightly, corrected me. I wrongly suggested—sometimes I get it wrong:
The evidence that you gave not only to this Committee but to the Public Accounts Committee, Admiral Tippet, enabled the Chairman of the Public Accounts Committee to say on the Floor of the House that it was the worst evidence he had ever received.
I was corrected by Vice Admiral Sir Anthony Tippet, who said, "The weakest, I think." It was the weakest evidence the PAC had ever received on statistics, finance and the cost-effectiveness of the Government's proposals.
I cannot do other than reach the conclusion that the Government are proposing this measure for reasons other than a saving to the public purse. I believe that the Secretary of State—and I regret his absence—thinks that he is a manager, that he can embark upon a Tory-sponsored managerial revolution, that he is a good boy and is gaining Brownie points with the Prime Minister. One way to gain his points was, of course, by his proposals for the ROFs, and another is this proposal for the dockyards.
The right hon. Gentleman looked around and found an adviser, Mr. Peter Levene. We know something about Mr. Levene's background. He went into the dockyards for a few days and produced a tardy, four or five-page document. He told the Secretary of State that, having examined the position, he thought it would be a great idea to have some form of commercial management, splitting the assets of the dockyards from the labour force.
I come now to the kernel of my argument. This is almost the first time in contemporary industrial history that we have made wage slaves of a labour force. I ask the Minister, who has some experience of shipyard working, whether this is not the first time that we are transferring, not capital assets, but a labour force into a contracting company, whose only asset will be that labour force—the employees and the project management group.
I know that the Minister is relatively new to this area, but he has civil servants ready to assist him. I ask him to name another occasion in contemporary industrial history where that has happened. We are returning to what, in Scottish terms, I call the tinned miners. In the 18th century, miners in Scotland had to wear a chain around their necks, which went along with a job in the pit. If they are subservient enough—I do not believe that they will be—the workers will wear checks round their necks to enable them to be transferred from one company to another. It is a ridiculous state of affairs in modern industry to treat the work force, the most vital asset—an asset that does not appear in any company's balance sheet—in this way.
When describing the background, the Minister said that the Secretary of State had embarked on a consultative process. The Select Committee described the way in which that was done as inept. Indeed, it was not a consultative process at all. Almost in the middle of the process documents streamed out of the Ministry of Defence explaining the position. There were 25 documents, and by now there may be more. In the middle of that so-called consultative process, the Government told the workers in the dockyards, in effect, "Make up your minds, but in the

meantime we are issuing a number of reports to explain the position." The Government made a farce of the consultative process. It was not consultation at all, because the Secretary of State had a closed mind on his preferred option and intended to take the step, come hell or high water.
Let us not forget that a Select Committee of the House was in the process of deliberating. It was obliged to rush—I use the word loosely—its report to try to forestall the closing date for the consultative period. Little time remained, following the issue of the report, before the commencement of the summer recess and then the proroguing of the House, in which to examine the recommendations. Little time was available for hon. Members to examine the position before the Second Reading. Even so, having examined the matter again, we reached the view—I accept that it was not conclusive—that the Government had still not proved their case.
These are early days in the process of Select Committees. Committees of this House do not have the powers that are possessed by their counterparts in Congress. If we are to build up the reputation of our Select Committees, we must accept that they have the important function of examining evidence and presenting views to the House so that hon. Members can decide issues for themselves. We shall be doing our Select Committee system a great disservice if the Government, who have a majority on them, treat the views of Select Committees in a cavalier fashion.
What kind of Navy are we likely to have in the late 1980s and 1990s? Clearly it will be a mixed Navy of surface and sub-surface vessels. Though I may hold different views from others about the degree of mix that should exist, it is clear that, despite the difficulties of financing Trident, we shall have a Navy with a substantial surface component, along with a sub-surface component.
A prime area of the sub-surface component will be the Polaris fleet and the SSNs. We had a hint from the Minister today about how the new contracting companies would come in and learn, in operational terms, how to refit and maintain the fleet. Such expertise on the part of the contracting companies will gradually have to develop.
Perhaps I should earlier have declared my interest, in that I am a long way from direct contact with the shipbuilding industry. As a member of what was the AUE, now the AUEW, I am a long way from being a Clydeside fitter. That is why I ask the Minister, who has considerable industrial experience, if he can point to a better project management set-up anywhere in industry than prevails in the present refit and maintenance organisation of the Polaris fleet. It is the finest project management that I know.
I have examined the list of companies that are touting for Rosyth and Devonport, and there are many more touting for the former than for the latter, though I shall deal with that later. Where in the contracting companies is there commensurate expertise as exists in the dockyards today? The Minister gave the game away, because he said that to enable the contracting firms to overcome the learning curve they would have to come into the dockyards and operate in parallel with the existing managements for 18 months. What a cheek—

Mr. Norman Lamont: indicated dissent.

Mr. Douglas: I shall willingly give way to the Minister if I have misrepresented him.

Mr. Norman Lamont: I did not say that they would operate in parallel for 18 months. I shall go over this point when I reply to the debate. The 18-month period was the time, I said, before we would work up to the proportion of fixed price work that we intend should be the ultimate. That is greatly different from what the hon. Gentleman is suggesting.

Mr. Douglas: Perhaps I put an unfair gloss on the Minister's remarks. The Minister is saying that the contract will be on a fixed price basis, but that initially it will not be for all of the 70 per cent. of the refit and maintenance of the fleet that now goes to the dockyards. There will, therefore, be a learning curve, however loosely one might describe it as such, and in that period the contracting companies will have to rely on the weight of expertise that now exists in the dockyards.
I repeat my question: where in any of the 11 contracting companies, which I shall not embarrass by naming, is there a corporate management equivalent to, let alone in excess of, that which exists in the dockyards now, particularly in the refit and maintenance of the Polaris fleet? I am sure of my ground, because that is the most prized corporate management in refit and maintenance work in ship repairing in the United Kingdom, and probably in the world.
What markets are we considering? About 80 per cent. of the ship repairing market in the United Kingdom is in the dockyards, and that work is now being touted for by the contracting companies. I agree with the right hon. Member for Devonport that some companies will probably tout for the yards so as to curry favour with the Ministery of Defence, and particularly with the new chief of defence procurement. The real prize will be that loading of Rosyth and Devonport in relation to nuclear refits. Those are extremely complicated refits, the expertise for which now resides in the dockyards.
The Secretary of State has a strategy that bemuses the House and relates to his view as a manager. I apologise for using the name of the Secretary of State when he is not here, but let us suppose that, as a good manager, he put his views with regard to the contracting arrangement to the labour force or to a Select Committee and was told that his case was not proven and was extremely dubious on managerial grounds. Surely a good manager would want to cry "Halt", to think again and to reach some other accommodation, but the Secretary of State has not done that.
The Secretary of State has not proved his case. Only Mr. John Garnett of the Industrial Society supported the Secretary of State's case before the Select Committee, and it was pretty poor evidence. Does the Secretary of State justify his case in terms of servicing the fleet? Perhaps in the past the arrangements have been too cosy, but no one can point to that arrangement as being to the detriment of the fighting efficiency of the fleet. If the end is not profitability but the fighting efficiency of the fleet, there is no justification whatever for the Government's case.
What will contracting companies do in bidding for fixed price contracts? Will they bid for them at the lower end of the fixed price? Certainly not. They will bid at prices that will reflect the difficulties of the refit process and their view of profitability. There is the concept of fixed price contacts plus the problem of emergent work. It has been suggested that there will be a considerable gain in expertise and in the accurate pricing and costing of

refits, particularly in emergent work. At present, the Navy is good at pricing 60 per cent. of a particular refit, because 40 per cent. of the price may be related to emergent work, but we have not grappled with the fact that contracting companies, in dealing with fixed price contracts, will price at the higher end of the scale. Even if they did the opposite, one can imagine what the situation would be after they got the work in the yard.
There might be a frigate at Rosyth or Devonport. Two thirds of the way through the refit the contractor might say that there was much more emergent work than had been anticipated in the budget. Would the Navy have to wait until the matter had been argued across the table? Would the Secretary of State come to the House and say, "I am sorry, but we cannot have the strategic nuclear deterrent now because we are negotiating with Taylor Woodrow"? Is that what is suggested? Alternatively, are we capable of devising contractual arrangements that are so firm and so fixed that no such situation can emerge?
The proposal in the Bill is a leap in the dark, not only in relation to the labour force—I have stressed the importance of that—but in relation to the reliability of the fleet as a whole. I repeat that perhaps in the past there has been too cosy a relationship—that is debatable—but it has never been to the detriment of the fighting efficiency of the fleet.

Mr. Tony Marlow: The hon. Gentleman is saying that perhaps there has been too cosy a relationship. I deduced from that that he feels that the operations may not have been as efficient as they might have been. If so, what has been done has been too expensive and too extravagant. There is a limit to the amount of money that can be spent in any area of the Government provision, including defence. If there has been too much expenditure in the area that we are debating, could not that money have been spent in other areas, to improve the efficiency of the Navy and the services in other ways?

Mr. Douglas: When there is an excess of £400 million, there is bound to be room for improvement in efficiency. Nowhere in their evidence to the Select Committee did the trade unions deny the possibility of achieving greater efficiency. Indeed, the trade unions were only too anxious to achieve greater efficiency, and argued the case for a trading fund, which would give the Government the accountancy constraints and innovations that perhaps are desirable to achieve some of the aims that the hon. Member for Northampton, North (Mr. Marlow) might desire.
I do not wholly support the idea of a trading fund. As the Select Committee pointed out, the savings as between the Government preferred option and the trading fund option are minuscule, and we have had no detailed estimates of those savings from accountants. The right hon. Member for Devonport and the trade unions suggested that there was a case for a detailed analysis of the trading fund option, as did the Select Committee on Defence.
The Government's view is that it is essential to transfer 19,000 people from Civil Service employment into some sort of contracting or operating company. There we have a distinction without a difference. When the right hon. Member for Devonport was speaking, the Minister of State, in an intervention, said that there would be no


possibility of having two or more companies within the one dockyard. I hope that I have not paraphrased him wrongly.
The Bill enables the Government to do almost anything with the dockyards. Let no one in any part of the House be under any illusion. I am sorry that the hon. Member for Plymouth, Drake (Miss Fookes) is not here. Is an operating company, as a sort of halfway house, suggested to persuade some reluctant Conservative Back Benchers to support the Bill, so that everything in the garden will be lovely?
The Secretary of State, as the sole shareholder, will hold that share in the public interest. The only difference is that the employees will cease to be civil servants. Unfortunately, the Secretary of State will be at arm's length from his Ministry and will be able, at will, to bring contractors into the yards to do his bidding. I suggest to my trade union colleagues that it will be very difficult for the lads in the yard to oppose it. It will be highly destructive and will put their future in jeopardy, as the Select Committee suggested. Therefore, it is not a convenient halfway house, although it might persuade some reluctant Conservative Back Benchers.
My hon. Friend the Member for Dunfermline, East (Mr. Brown), other Fife Members and myself respect the contribution that Rosyth dockyard has made to local employment, particularly the employment of apprentices. There is no indication whatever that any of the contractors would give to apprentices the training and background that the dockyards have given them. Other dockyards might have done something in social terms, such as more training than was needed, but that is a vital and important contribution to the labour force, not only in the east of Scotland, but in Scotland as a whole.
The Secretary of State, for doctrinaire reasons, has become unpatriotic. The Conservative party is usually depicted as the party safeguarding the defence of the nation. We have had some strictures from the Minister over the Trident force, and I shall be happy to deal with them on another occasion. (Interruption.] The Minister should not tempt me. I shall deal with them on another occasion. The Secretary of State has placed the fighting efficiency of the fleet in jeopardy. He has undermined the morale of the most vital asset—the labour force. I understand why the Secretary of State is not here—he should be ashamed of himself for introducing the Bill. I ask my hon. Friends, and anybody with sense on the Government Benches, to vote against the proposals.

Mr. Bill Walker: I share the concern of the hon. Member for Dunfermline, West (Mr. Douglas) because Rosyth is a vital part of the Scottish economy. The people who work there have shown loyalty to the country and to the Royal Navy for a long time.
Against that background, one may wonder why we are debating the subject. If loyalty were the only ingredient that mattered, we should not be having the debate. There is more to it than that. As the decades have passed, certainly since the second world war, the costs of maintaining modern equipment, particularly modern submarines, have escalated to the point where the defence budget in that area, and in others, is now under considerable stress. If we had unlimited resources and were able to keep voting extra funds, there would be no problem.
I find the argument for the protection of jobs in the defence industry rather interesting coming from the Opposition Benches. Every time we have a debate on defence, the Opposition want to cut expenditure. It makes one wonder how they will achieve those marvellous cuts and still maintain the work force and the efficiency that has been sustained at an acceptably cost-effective level for some time.
It is equally true that in the past 15 to 20 years there have been enormous pressures. There have been many different inquiries and reviews into the cost of maintaining our royal dockyards. They came about not simply because people felt that we should conduct reviews but because it was glaringly obvious that more changes were required in the way in which we manage our dockyards.

Mr. O'Neill: Had the hon. Gentleman been present at the beginning of the Minister's speech, he would have heard him say, with the greatest diffidence, that there was no guarantee of any substantial impact on the defence budget from the proposals in the Bill. Somewhere around 5 per cent. was as much as he could offer, and that was with a £400 million turnover in the dockyards.

Mr. Walker: That was an interesting intervention. It is typical of what one would expect from that source. We are indulging in the exercise—

Mr. Gordon Brown: "Indulging" is the right word.

Mr. Walker: It is an appropriate word.
We are indulging in the exercise because the forward projections show—the hon. Member for Dunfermline, West put his finger on it—that if the costs of emerging technology and in other areas continue to escalate as they have in the past, the defence budget will be unable to sustain the servicing that is essential if we are to maintain a viable fleet. The defence budget is the budget that the Opposition are always proposing to trim and cut. I agree with the hon. Member for Dunfermline, West that it is important—in fact, vital—that we maintain a fleet that is capable of conducting the exercises that we demand of it.
In the past, the Navy has had to face this problem on more than one occasion. The defence policies of Governments, particularly Labour Governments, have imposed on it a task that it could not adequately undertake because it was inadequately equipped.
Listening to the Opposition, I find it fascinating that the Labour party's defence policy is non-nuclear. Anyone who has been to Rosyth knows that the special expertise that has been built up and developed there over a long period is in nuclear-powered submarines and submarines equipped to fire nuclear missiles—Polaris submarines. I do not know how the Opposition can guarantee jobs at Rosyth, where the workers have a great skill. I believe that it is a great skill, and like other skills it is of use only if it is adequately and effectively managed. How can those people continue to look forward to job security when the Opposition's defence policy will phase out the jobs?
The major difference between the Opposition's defence policy and the Government's is that the Government's is based on guaranteeing the jobs at Rosyth. Trident guarantees many jobs, and no one should underestimate the value of re-equipping the Polaris fleet and the length of time that that will guarantee jobs at Rosyth. As long as the Trident submarine is in service, there will be a demand


for it to be serviced at Rosyth. Linked to that are the jobs at Coulport. They also depend on the continuance of our independent nuclear deterrent.
The Labour party wants to get rid of nuclear weapons in the United Kingdom. Labour Members are happy to discuss the details of jobs, emerging technology and what they describe as top secret work and equipment, but they will not argue about the specifics. What will the people of Rosyth do in the future if a non-nuclear defence policy is introduced? There is no question but that the savings that the Opposition claim will be made embrace the people at Rosyth who work on the Polaris refitting programme. The SSNs are also serviced at Rosyth. What will happen to them under a non-nuclear programme? Obviously, they will not be carrying nuclear warheads. They will not be equipped with depth charges that are nuclear detonated. They will have conventional equipment. The Royal Navy will be trying to sink deep-running submarines without the equipment to do it. That is what we are hearing from the Opposition. It is up to them to tell us how they can guarantee the jobs. No one can guarantee the jobs if we phase out the equipment that has to be serviced.
I now come to the SDP's defence policy.

Mr. Douglas: Deal with the Bill.

Mr. Walker: I am dealing with the Bill.

Mr. Douglas: Tell us about it.

Mr. Walker: We are dealing with the reasons for the management structure under the expected expenses and anticipating the expenses only because we have the equipment at Rosyth, which has to be serviced. Unless we have the equipment, we shall not need Rosyth dockyard, and no changes in the management structure will be required.
I have never been able to work out how the Social Democractic and Liberal parties manage to live together. The SDP's policy is for keeping Polaris until it becomes ancient and decrepit. Under the SDP's programme, Polaris submarines will continue to be serviced at Rosyth. According to that party's calculations, it seems that the submarines will require more frequent servicing. Perhaps that is one of the short-term advantages of that policy. SDP Members want to sustain and maintain an aging fleet of submarines. Anyone who knows anything about the aging submarine will know that it requires more frequent attention to its hull and structure. Under the SDP's policy, therefore, there might be a need to make some changes in the management in the short term at least, but in the long term, if the Polaris fleet is to be phased out when it is impossible to sustain and operate it, the jobs will disappear at Rosyth.
The Liberals' policy is akin to that of the Labour party, and makes this debate on how to manage the dockyards academic. If their policy were introduced, the dockyard force would not be required on such a scale, and the management changes would not be required.
We maintain the work force at a certain level so that we can sustain our fleet at sea, and that level is based on calculations of the number of submarines, whether Polaris, Trident or SSNs, projected for present operations and future purchase. It is against that background that we must examine Rosyth. Much of the waffle from Opposition

Members both inside and outside the Chamber has been brought about by the fact that they find themselves under threat because the work force at Rosyth, like those in many other places, has trade unions that support the Labour party. It is an interesting thought that the people who support the Labour party may be putting their own jobs at risk because, unless there are submarines to service in future, there will be no jobs.
We have to consider the management of the dockyards because the management controls the way in which work is done and is usually responsible for its cost. The hon. Member for Dunfermline, West said that perhaps it was too cosy an arrangement. That was a lovely way of saying that they were all old boys working together, who did not control or manage as they could or should have done. If I am wrong about what the hon. Gentleman said, perhaps he will tell me. I should like to know what "too cosy an arrangement" is.

Mr. Douglas: The hon. Gentleman should make his own speech.

Mr. Walker: Perhaps the hon. Gentleman was suggesting that, because of the way in which the dockyards were managed, the Navy, the customer, was unable to get out of the dockyards what it required.
That being so, one has to ask why the Government have gone for the option that they have chosen. I had some doubts about whether it was the best of the options. The proposals put forward by the trade unions in the trading fund option were interesting. In other circumstances, we might have considered it preferable. We are concerned about the costs over the next 10 to 15 years.
In the House we often hear from Opposition Members about the cost of Trident and what it will do to the defence budget. There is no question that, while Trident is being introduced and while we are maintaining our Polaris fleet and SSNs, we must have the most effective, cost-effective system. It could be said that the trading fund would have given that to a great extent. but the question that we have to ask ourselves is whether that would have removed the "too cosy an arrangement" that the hon. Member for Dunfermline, West talked about. We should be leaving the control and management in the hands of the present people. The trading fund gave more clearly defined areas of responsibility and costs, which must be of tremendous value.
No one can deny that the Government's proposals are different. I have no doubt that it will be argued that they are novel and untried. That cannot be disputed, but the same can be said about entering into any new area of management or technology. When we first had nuclear-powered submarines, they were novel and untried. There was a learning curve when those submarines were first brought into service, both in their operation and servicing.

Mr. Marlow: The Government have embarked on a large programme of privatisation. My hon. Friend will be aware that recently British Telecom was privatised, or given back to the people, and in that way a new structure was established. That was a new and untried structure, and it included the Office of Telecommunications. Despite what the Opposition said all along, it has been very successful, and the new and untried structure that the Government put forward is now massively liked by the people and much appreciated. This is another such example.

Mr. Walker: My hon. Friend is right. He is moving into an area to which I was about to refer. With novel and untried things, there is bound to be criticism. We must expect a feeling of uncertainty and insecurity, particularly in the work force. It would be remarkable if the workers did not now feel insecure. Of course, they do, and not unnaturally so because they believe much of the current scaremongering.
Let us consider the evidence in industries which have been privatised. The nearest example is British Aerospace, which was privatised by the Government despite all the fears, qualms and stories from Opposition Members about the ghastly things that would occur. They kept talking about top secret work and wondered how secrecy would be maintained if British Aerospace was privatised. They asked how that could be done in a privatised company. Anyone who has made any attempt to study those matters knows that private British companies have always been involved in defence procurement for top security work. Some of them have developed new equipment, often ahead of the demands of the services. The prime example was the Spitfire, which was developed privately and became the front-line service fighter of the Royal Air Force.
Even today British Aerospace is not showing any of the dreadful signs and symptoms of trouble which Opposition Members predicted during our debates on its privatisation. Experience shows that the trade unions at British Aerospace are some of the most effective and efficient in the country. Indeed, they are an example to many of us. They come to the House and lobby on behalf of their company for orders and greater efficiency. They demand that their company is the most efficient and profitable. They are quite different from people who lobby simply to maintain numbers of jobs. They are both different and progressive.
I welcome the many visits from the trade unions of British Aerospace. They tell us what the Government should be doing. The European fighter aircraft is a good example of how the trade unions developed an attitude early on. They decided that the project should be not French based but based on the experimental aircraft which British Aerospace was constructing. Privatisation, at least in the form introduced into British Aerospace, has undoubtedly been successful. It works, and the work force responds to it.
I now turn to the complaints about top secret work. Opposition spokesmen often say, "The Government propose to put Britain's ultimate deterrent"—the nuclear deterrent force, including the Polaris submarine force, which is later to be replaced by Trident—"into the hands of private contractors." Indeed, that would be foolish if it were to put the nation's security at risk, but what evidence is there of greater risks if one privatises areas of top security, instead of retaining them all in the public sector?
Most high technology areas are already in the private sector, and certainly all avionics are. Who can deny that British avionics are the best in the world? It is a great tragedy that we do not tell people more often how we have maintained top security and kept out both enemy agents and agents of industrial espionage interested to find out how our top security avionics work, are manufactured, constructed, maintained and serviced. Most of our avionics companies—for example, Ferranti, GEC, and Marconi—are world leaders. The British head-up display and the laser gun sight are way ahead of the

equipment of anyone else. No one has yet suggested that, because they are in private hands or they are returned to the manufacturing factories for servicing, they are a security risk.
In the days when the Vulcan bomber was our deterrent force, the Vulcans were serviced partly by the Royal Air Force at maintenance units, and partly by the manufacturer. There was no risk. Where, then, do Opposition Members find evidence that placing the servicing of our nuclear submarines in the hands of private contractors will put the nation's security at risk?

Mr. Gordon Brown: If the hon. Gentleman is so sure that there is no problem with top secret and classified information, and with the policing of the Official Secrets Act 1911, why is a Ministry of Defence committee sitting on the issue at present, as part of the 19 working parties which are considering how to manage the scheme? Is it not a tribute to the sad state of the Scottish Conservative party that the first Back-Bench Member to speak in favour of the proposal is the newly elected—incidentally, by English votes—Scottish chairman of the Conservative party? When will he fight for jobs in Scotland, particularly as Rosyth, with 8,000 jobs, is the largest industrial establishment at risk under the Government's policies?

Mr. Walker: I might have expected some such nonsense from that source. If the hon. Gentleman had made any attempt to study the facts, he would know that I am the second Conservative chairman to be elected under the system of which he complains. I objected when I was the losing candidate, but nothing was done about it. Within 30 minutes of my election, I went to see the chairman of the 1922 Committee and asked to have the rules changed.
I am not worried about the background. Indeed, I care as deeply about the jobs at Rosyth as the hon. Gentleman does. If he had bothered to do any homework, he would know that there is a naval workshop in my constituency. I am anxious that we maintain these operations in Scotland, and the best way to do it is to ensure that the customer—the Royal Navy—has the funds to purchase the equipment of the future. That is why I support Trident. It does more for job security at Rosyth than almost any other single project. For the hon. Gentleman to shake his head and to tell the Rosyth work force that the cancellation of the Trident programme will not put their jobs at risk is to live in a world of make believe.
All the experience shows that when programmes are cancelled, servicing jobs are put at risk. That always happens. The hon. Gentleman suggests that he cares about jobs, but I want to protect jobs and ensure that high technology remains in Scotland. I do not want the jobs and experience to disappear, which will happen if a future Labour Government cancel programmes. [HoN. MEMBERS: "What about Gartcosh?"] Gartcosh is not about emerging technology or the future, but about the present. I am talking about the future. We should consider carefully how to maximise our opportunities.
I agree with the hon. Member for Dunfermline, West that the Rosyth work force has skills and talents that we should not put in jeopardy, and if I believed that any provision in the Bill would put at risk the future of the dockyards, there is no way that I would support it. The finest way to secure jobs at Rosyth is to ensure that we have a programme for the future that supplies the work


force with the sort of equipment that it is good at servicing—nuclear-powered submarines which carry nuclear missiles.
I cannot follow the logic in the argument that somehow one can cancel programmes but still provide work, and that is where I differ from the Opposition. We must reassure the work force that it is not being misled. As a Government, we have a responsibility to carry the work force with us when we introduce measures such as this. It is not enough simply to deliver grand speeches in the House of Commons or make statements on television. It is essential to go into the dockyards and explain clearly what the proposals mean and how they will be operated once they come into force.
If we are to take workers along with us, particularly in periods of great uncertainty, it is essential that any areas of doubt are examined together. It is also important, when introducing a programme of franchising out the management, to ensure that those who take over operate under conditions that preserve the skills, talents and morale to which the hon. Member for Dunfermline, West referred. I apologise if the hon. Gentleman thinks that I am damaging his case, but as we are both concerned about jobs it is inevitable that we should touch on the same topics, including morale, and one of the surest ways of destroying morale is not to explain clearly what one is proposing.

Mr. Randall: Is the hon. Gentleman aware that the hon. Member for Plymouth, Drake (Miss Fookes) felt that the consultations were not satisfactory and that the dockyard workers felt that the consultations were a mere pretence?

Mr. Walker: I cannot accept that. I cannot accept a situation in which consultations are a farce. We must go through a process of consultation on all the areas of uncertainty, and they must not be a farce. I accept that for whatever reason some individuals will want to object, but if evidence is available of the need to improve the consultative process, it should be produced. Now is the time for that to be done. After all, this is only the Second Reading stage. Now and in Committee are the best times to press any Government to consider changes if we think that their legislation contains areas of uncertainty.
It has been said that the 2,000 job losses at Devonport and 400 at Rosyth are incorrect. Fife regional council has suggested that there will be greater redundancies, but the onus is on it to present us with the facts that substantiate that claim.
I have a high regard for the work done at Rosyth, although it is true that in some instances the servicing of submarines has been late and that the Royal Navy has been unhappy. On occasions, naval officers in my constituency have complained that they have had to put right problems that should not have arisen.
If the same number of frigates and submarines are available for servicing, does that mean that Fife regional council envisages the same work load being done by 2,000 fewer people? That is not sensible. If that is not what the council means, it can only be suggesting that somehow Rosyth will have a diminishing work load.
If that is so, we must be clear about what it means. I understand that in future the royal dockyards will be required to satisfy the Navy that it is getting good value

for money in terms of the work that is done. There is to be no change in the number of ships, and certainly not in the number of submarines, that will require servicing. Indeed, an increased number of submarines will require servicing, because there will be more hunter-killer submarines, not fewer. Given Rosyth's special expertise, I would have thought that it could look forward to more work.
If the Navy has more ships for servicing and Rosyth is the obvious place at which to carry it out, from where will the redundancies come? Will they be achieved by increased efficiency? I doubt that very much, because no one will convince me that the present Rosyth work force is overmanned to the tune of 2,000. That is nonsense, and anyone making such a statement will be laughed all around Fife, because it is just not true.
We are talking about improvements in management that will produce better and more cost-effective work. That is not the same as reducing numbers. If the ships are serviced more speedily, if the job is done more effectively and if there are more submarines to service, a far better cost ratio per unit will be achieved.
Frankly, I think that Fife regional council picked the figure of 2,000 out of the sky. I am still waiting for the council to substantiate how those 2,000 redundancies will occur. If it is saying that in future a Labour Government will run Rosyth, I can certainly envisage 2,000 redundancies because, without a Polaris or Trident programme, there will be fewer important ships to service.
To my mind, the council's claim is not about the way the dockyards are managed but about how the Royal Navy will in future be able to give the dockyards the same number of ships for servicing as it has done in the past.
I am concerned about the jobs at Rosyth and the effect that they have on the Scottish economy. Given the situation that will prevail in the next 10 to 15 years, it is vital that we have in place the new training that will be required and the new practices that will be necessary to service future equipment. If we are to have the willingness and attitudes that are vital for the dockyards to be cost-effective, the new management must be monitored at each stage so that we know that it is producing what the Bill envisages.
I know that some of my hon. Friends are not too happy about this measure. If we are not satisfied that the proposed way of managing the Royal dockyards is the best way, my hon. Friends have a duty to spell out their doubts clearly in Committee on each clause and each amendment, and each argument must be answered in detail. I assume that the Bill will go through unamended. Unless my hon. Friends' reservations about the proposals have been satisfied, there is a danger that we shall put into operation a package of proposals that will not carry the convictions of hon. Members in whose constituencies the dockyard workers live. My hon. Friends have a special responsibility. We must think seriously about trying to win the hearts and minds of those who are deeply worried about what will happen as a result of the Bill.

Mr. Michael Foot: I thought for one moment during the speech of the hon. Member for Tayside, North (Mr. Walker) that the Government had been able to disinter a supporter, but in his last few remarks that support became frayed. He finished by


delivering as menacing a threat to the Government as he is ever likely to deliver. I can see the Government trembling.
I should like to return to the point that I made at the beginning of the debate about the Secretary of State's absence. I say that with no disrespect to the Minister who introduced the Bill. The Secretary of State's absence is not a small matter. It would have been open to the Minister to insist that he should have been here and to insist to the Leader of the House that arrangements should have been made for the Bill to be introduced when the Secretary of State was not absent from the country on other duties. The doctrine in these matters is that a Minister's first responsibility is to the House of Commons. It does not appear that that responsibility has been discharged by the Secretary of State. I have had no answer to the question whether the Government attempted to change the timing of this debate so that the Secretary of State could be here.
This is a controversial Bill. If it were a trivial, tuppenny-ha'penny Bill, the Ministry of Defence might be able to say that it could be left to Ministers other than the Secretary of State. It is plain from what has been said that hon. Members on both sides of the House are aware that the Bill involves a major principle. It involves the future, the status, the work and the prospects of many of our citizens—people who have given great service to the nation. Their livelihoods are at stake, as the hon. Member for Plymouth, Drake (Miss Fookes) underlined. In such circumstances, for the Secretary of State for Defence to say that he will not trouble to come here or make arrangements to be here is an insult to the dockyard workers, the industry and the House of Commons. It also injures the way in which we seek to do our business.
No hon. Member who has listened to the debate could doubt how powerful are the objections from both sides of the House to what the Government propose. The hon. Member for Drake made that clear, but it was not just her speech. Many other speeches have been made which have mentioned the same point. Every speech, except that of the hon. Member for Tayside, North, has been extremely damaging. Every speech has had to finish with a plea to the Government. Even the hon. Gentleman, their one supporter, ended with a plea. He said that we should look at the matter afresh and have real consultations with the people who do the work.
If the Secretary of State had been here, we should have been able to press such matters upon him. The Minister has a disability. He cannot change the Bill at this stage. He has no power to respond to the debate. He cannot say that he will consider the case that has been put by hon. Members on both sides of the House. In view of what was said when the earlier statement was made, the Secretary of State's absence is an insult to the House of Commons. He will do himself a grave disservice. It is arrogant of the Secretary of State to say, "Let the House of Commons get on with its business. I shall not worry about it."
Every parliamentary opportunity has been taken to try to impress upon the Government the fears and anxieties felt by different sections of the House. That is what Select Committees are for. That is what the Public Accounts Committee is for. The Chamber has the power, the right, the authority and the duty to survey what those Committees say, but they are set up to advise us—and all the advice that has come from those Committees is opposed to what the Government propose. Never before,

I suppose, in parliamentary history have there been so many Committees recommending that a Government should not do what this Government propose.
The Bill is a kind of constitutional outrage. If we were not discussing something even more serious—what the Government are doing to workers throughout the country and in the dockyards—there would be many reasons for objecting to the Bill because of the form in which it is presented. Even the excellent Library, which produces reference sheets, was dumb-founded by the Bill. In its introduction, the Library said:
The interpretation of this Bill … presents one important problem. It is basically enabling legislation, not just in the sense that it enables orders to be made at a later date but also because it enables companies to be established and a particular scheme to be operated.
The Library describes its difficulties in suggesting to Members how they should consider the Bill. The Library's note finishes:
In the case of the Dockyards one has to remember that all assurances about conditions of staff service need to be in the Bill itself for them to have any legal validity at this stage.
In other words, the Government have produced one of the vaguest enabling Bills ever presented to the House.
They could do almost any thing under the Bill and claim that they were acting within the proper confines of the Bill. All they have to do is to introduce orders late at night. They are giving themselves the power in the future, late at night, to do any of the things to which all the Committees have objected whenever they have been able to examine the matter in detail.
As my hon. Friend the Member for Dunfermline, West (Mr. Douglas) has said, the Committees have spent many hours examining the proposals. By this enabling Bill, the Government are giving themselves the power to ram through at the last moment any solution that they want. They have merely to call upon their majority in the House to do that. For them to proceed with such a matter in such a way can only cause grave damage to the House of Commons.
The right hon. Member for Plymouth, Devonport (Dr. Owen) asked what we were to do when every kind of parliamentary resort had been used to bring pressure on the Government and the Government would not listen. The Government would be doing a great injury to the House if they used their majority in that way. They cannot complain about the representations made to them by the dockyard workers and the various Committees, but there has been no real consultation between the Government and these people, as the hon. Member for Plymouth, Drake has said. The hon. Lady knows the situation better than the Minister, for she has been interested in this matter from the very beginning. The hon. Member for Tayside, North, almost on bended knee, pleaded for consultation in future. The Government knew that they were doing something that was bound to cause deep offence in many quarters, but they did not bother to have any decent consultation, just as they have not bothered to listen carefully to any representations from the various Committees.
When the Secretary of State deigned to come to the House and make the original announcement about the Bill, one of his chief methods of proceeding was to sneer at hon. Members on both sides of the House who raised matters that affected their constituents. The Secretary of State turned on them, saying that they were just talking about constituency interests, as though that was in some way demeaning. He then went on to try to blame the Labour


party for the situation. He said that because the Labour Government had not introduced reforms and changes at an earlier stage, this Government were now forced to make those changes. Time and again the Secretary of State has said that the Labour party ran away from such propositions. I should be happy to discuss the Labour party's record in relation to the dockyards, because it is a fine one. It is hopeless for the Government or anybody else to blame the Labour party for the state of the royal dockyards.
The royal dockyards played a pre-eminent part in the Falklands war. No Minister would dare to criticise what the dockyard workers did during the Falklands war. I vividly remember going to Devonport dockyard at that time of crisis and seeing how efficiently, indeed super-efficiently, the people there were conducting their affairs. Everyone paid the greatest tributes to the royal dockyards and the part that they played during the Falklands war. The Secretary of State, when he last deigned to speak to us on the matter, implied that the royal dockyards were being mismanaged because of the Labour party's neglect. The royal dockyards, which performed so brilliantly at the time of the Falklands war, were operating under a system of neglect for which the Secretary of State says the previous Labour Government were responsible.
It is not true that there has been shameful inefficiency in the dockyards. Nobody has said that no changes are needed. Of course, there are things that could be changed. The unions in the dockyards have always been prepared to accept that. The test of the royal dockyards is what they do at moments of great crisis, such as the Falklands war. At that moment the royal dockyards proved themselves to be super-efficient. For a dockyard to be super-efficient, it must have resources available which it may not need to use all the time. That is one of the problems.

Mr. Sayeed: No one disputes the innate patriotism of the dockyard workers, and they worked super-hard because of that patriotism. At the time of the Falklands war they did jobs in 18 weeks which were scheduled for two years, but that very scheduling shows that in peace time they were not working as efficiently as they could, so a different form of management is required to increase peace-time efficiency.

Mr. Foot: I shall answer that point by giving the hon. Member for Bristol, East (Mr. Sayeed) and the Government a history lesson. This matter has been considered before by people who have spent their whole lives in the dockyards. The trade unions and management have had to deal with the problem of pressure on the yards at special times. In war time or at times of near war and special moments of crisis, the resources must be available to do things that cannot be done on a common form basis. If that special responsibility were removed and the dockyards were run on a normal commercial basis, another Falklands crisis might occur and no royal dockyard would be able to meet the special responsibility.
The Labour party found the correct solution to that problem, and the same solution would work today. After the first world war, the numbers working in the dockyards were not maintained. People were sacked and made redundant. They were sacked quicker then than now. In 1919 almost 1,000 workers were sacked on one day, and they had to be out within a week. That is how dockyard

workers were repaid for what they had done in the 1914–18 war. The workers were extremely bitter about that. That was one of the main reasons for the foundation of the Labour party in Devonport, and I am sure that the same is true of Portsmouth and Chatham. After 1918 Governments were reckless in human terms. They did not care about sustaining on a long-term basis the service that the dockyards could provide for the nation.
In 1945, after the second world war, a Labour Government had the responsibility of caring for the dockyards. The Labour party learnt from previous mistakes and would not sack dockyard workers. The Labour Government would not return to those former barbarous methods, partly because they recognised what the dockyard workers and the Navy had done in the war, but also because they did not believe that that was a sane and sensible way to run anything.
After 1945 the Labour Government managed the dockyards differently. All the clever ideas that the Minister talked about—for example, that the dockyards should find other kinds of work, which he claimed were his brilliant schemes—were merely what the Labour Government did after 1945. The Labour Government introduced repayment work. Some of the admirals at the time were not passionately fond of that, but we went ahead and managed to maintain the dockyard labour force at a good level throughout that period. We enabled the dockyards to refit other types of ship and merchant vessels and so maintain the strength of the labour force. We did not say that it was necessary to maintain the labour force at that level for all time, but if the royal dockyards have to perform the essential task of maintaining the British Navy the labour force must be maintained over a long period. It must have security, and the workers must see a future for their children, their families and their communities.
There may have been a need for further changes in the past decade. The right hon. Member for Plymouth, Devonport (Dr. Owen) said that huge sums were invested in the dockyards to enable them to do their job properly. The Opposition do not believe that that solution is perfect or that no further changes are needed but nothing could be so crass as the Government's present proposals. The Government are wrecking all that has been built up in the dockyards over this period by turning on the dockyard workers after praising them for their hard work during the Falklands campaign. The Government have forgotten how quickly the dockyard workers dealt with all their problems. I believe that Devonport royal dockyard is the most efficient naval dockyard in the world due to the way in which it has been managed and the spirit of its workers. In saying that, I do not mean to denigrate Rosyth. Rosyth, Chatham and Portsmouth also have fine records.
Under the proposed new scheme there will be great competition between Devonport and Rosyth. I am not sure how that competition will be resolved. I do not know what will happen if the new Devonport dockyard company goes, or seems likely to go, bankrupt. Will the Government let that happen or will they step in? Will it be a fake type of competition? The whole idea is monstrous. The Government should never have embarked upon it. Even after embarking on it, they should have listened to what was said in so many quarters.
The Government say that this has nothing to do with the Royal Navy—that it is just a question of commercial management. That, too, shows how little they understand.


If they had gone to Devonport and Rosyth, or even to Portsmouth before they started closing it, and talked to people who had spent their lives there—dockyard workers, admiral superintendents or whatever—they would have heard a very different story.
The roots of this matter lie deep in British history. I know that it is an insult to mention history to the Government. Both history and consultation are dirty words in their dictionary. The great naval triumphs of Britain were first the triumphs of the dockyards—nationalized dockyards, although I do not wish to rub that in too much. If the Minister ever takes time to read some history, or if any member of the Government has the first beginnings of any knowledge of our history, he will discover the truth of the matter. As Trevelyan puts it,
Henry VIII had founded the Royal Navy. Under Edward VI and Mary it had been permitted to decay. Under Elizabeth it was revived … Then, in a fortunate hour"—
1578, 10 years before the Armada—
Elizabeth put John Hawkins in charge of the building and upkeep of her ships. During the decade before the coming of open war, which the Queen had so long and so wisely postponed, Hawkins did as great a work in the dockyards as Drake on the Pacific and Atlantic coasts.
The same has happened twice in our own century. The Falklands could be regarded as a third example. On none of those occasions has anyone dared to say that the people in the royal dockyards have not served this country properly, yet the present Government care so little about all that that they will not even consult those people properly about their own future.
All this is just part of the Government's doctrine that nothing counts but the balance sheet. Governments who proceed on that basis eventually find that they cannot even run the balance sheet properly. Having begun by saying that everything must be subordinate to the balance sheet, the Government have landed us in bigger deficits than we have ever known in a whole range of areas.
An article by Raphael Samuel in The Guardian today,
albeit on a different subject, touches on the Government's attitude to these matters. He says:
If there is one thing which may yet sink this government … it is the way it has personally devalued us and poisoned the very idea of public service. Under the harsh glare of cost-benefit analysis, and in the shadow of micro-chip technology, it appears that the entire working population of this country—teachers, miners, engineers, even Health Service workers"—
we must now add dockyard workers—
are all, in some final sense, actually or potentially redundant, a drag on the nation rather than its precious human capital, as 'uneconomic' as the villages which Mr. MacGregor is consigning to oblivion.
With this Bill the Government are poisoning a public service which has brought nothing but help and honour to this country. Whatever the Minister says, the best thing that he can do is to report to the absent Secretary of State for Defence, who did not have the nerve or the courtesy to come here today, that the whole House is outraged by his proposals and will fight them every inch of the way. Moreover, it will be no use carrying them through because, when Labour returns to government, we shall restore the royal dockyards to their proper place of esteem and operation.

Mr. Jonathan Sayeed: In considering the future operations of the royal dockyards, five options are available. The first option is to do nothing. That is the option that the Labour Government took after the Mallabar

report in 1970. No doubt they found it politically expedient to refuse to do their duty and address a problem that had existed for 300 years. The present Government do not duck their responsibilities. It is the duty of the Government to deal with difficult situations, and my right hon. Friend the Secretary of State is absolutely right to bring in a Bill which seeks to deal with the deep-seated problems of the royal dockyards.
The second option is to do next to nothing. This is the option adopted by the right hon. Member for Plymouth, Devonport (Dr. Owen) in suggesting that we set up a trading fund. Such a proposal would mean considerable upheaval, but very little gain. The work force would remain in the Civil Service, the consequent rigidities would continue and there would not be sound commercial management, because that would be impossible within such a system. The barriers to investment and the other financial constraints would not diminish and the inherent delays of the Civil Service would mean a lack of flexibility in pay, in the size and mix of the work force and in the terms and conditions under which it works. There would be no chance of profit sharing, which the Government's proposal offers, and nearly all the current problems of the dockyards would be perpetuated. The trading fund option would thus be no more than a cosmetic change.
The third option is full-scale privatisation. Personally, I am strongly against that. To allow control of a prime strategic defence asset to pass into private hands would be utterly wrong. It would confer on those private individuals considerable bargaining powers and there would be no certainty that those powers could not be exercised to the detriment of the nation. I believe that the whole House would reject that option.
Of the two remaining options, one is the private limited company option supported by my hon. Friend the Member for Plymouth, Drake (Miss Fookes). The Government would be the sole shareholder in the company. We have some experience of Government-owned companies of this kind—Austin Rover, British Airways and Rolls-Royce—but in the case of the dockyards, unlike what happened in those cases, the Government could not sell the shares, because that would lead to full-scale privatisation, which we all reject.
There are demerits in the plc suggestion. The first relates to capital expenditure. I believe that initially, at any rate, the enterprise would have to be Government funded, because finances could not be sufficiently self-generated. We would have to determine the basis of the borrowing powers of the plc. Would they be guaranteed by the Government? If the moneys came from outside, what interest rate would be charged? The plc does not offer the same inducement to make the necessary efficiencies in the dockyards. Nevertheless, it is a possibility and there may be a chance of having a hybrid arrangement, with Rosyth under commercial management, and Devonpon as a plc. Hybridity is permitted within the terms of the Bill and the plc option would always be available as a fall-back.
If the dockyards were commercialised, the majority of the fixed assets would remain in the Government's hands, but the operation of the yards would be undertaken by private contractors. The right hon. Member for Devonport decried this idea, as though it had never happened anywhere. Although I accept that there are no parallels between hotels and dockyards, it should be said that there are many systems of franchise, and not all for fast foods. Many major hotels are run on that basis. It is possible to


have the fixed assets owned by one company and for another company to operate those assets. That is commercially effective. There may be no exact parallels to the franchising of dockyard management, but the right hon. Member for Devonport showed a considerable lack of understanding of how franchising works by rubbishing the concept.
The majority of the fixed assets would remain in the state's hands if there were commercial management. That is the Government's preferred option, and it is the only option in the short term that will encourage the considerable shake-up that is necessary in the dockyards, in both attitudes and demarcation. For that reason, it is my preferred option.
To make this option, or indeed the plc option, work effectively, there are certain provisions which need to be set out in the Bill, or at least in the commercial contracts. The initial—and I stress the word initial—contract period should be increased from seven to 10 years. This will include two to three years to reorganise and rationalise the operation of the dockyards and it would be fair to give the management company thereafter a seven-year run to prove how effective it is. There should be a five-year or seven-year review of operation in the initial period and the company would be put on warning if it was inefficient. After the initial 10-year period, subsequent contracts should be for seven years. It is important that the contract should be in excess of the life of a Government, of whatever party.
The second point is that the Government must take powers to act unilaterally to take back to themselves the operation of the dockyard if at any time they believe that the strategic interests of the country are being imperilled by the managing company. That right should be set out in the Bill. This should occur without a long review process. At a later date, compensation for the removal of the franchise could be agreed mutually or through an independent assessor. It is important that the Government should be able to act unilaterally if they feel that the defence of the nation is in peril.

Mr. Clive Soley: This is an interesting thesis. Does it not imply that, as strategic interests can be so important at times, the management which the hon. Gentleman is suggesting should take over the dockyards may not be up to the standards required? If that is so, why is the hon. Gentleman suggesting such an option?

Mr. Sayeed: I think that the hon. Gentleman misunderstands me. I am not suggesting that it will happen. I am suggesting that, in a belt-and-braces and string-round-the-waist Bill, we should ensure that, in such an event, we have an effective and immediate remedy.

Mr. Soley: Is the hon. Gentleman accepting the Government's thesis that the present management is not good enough?

Mr. Sayeed: I am suggesting that the whole make-up of the dockyards—I agree with what my hon. Friend the Minister said—ensures that they cannot be as efficient as we would like, or as the Navy would like. I am not saying that the chosen management companies will be inefficient. I expect them to be chosen on the basis of their efficiency. However, we still need to ensure that, if the

worst came to the worst, the Government could take back into their hands the -management of the dockyards, and that the Bill, or at the very least the management contract, permits this.
I hope that the Government will encourage companies to write into their bids a scheme for encouraging profit sharing. This would encourage workers in the dockyards to play a much fuller and more involved part than mere salaried employees.
The refitting of SSNs is carried out at Devonport, though in future this will take place at Rosyth as well. The refitting of Trident SSBNs will be undertaken only at Rosyth. I accept, with certain reservations, that the Government are keeping their finger on the pulse of defence procurement and expenditure and are increasingly effective, but I am sure my hon. Friend will agree that competition is the best tool for controlling costs.
There is no inherent merit in transferring a public monopoly into a private monopoly, and I urge my hon. Friend to consider the suggestion that the parties which own the shipbuilding yards should not be the same as those who own the commercial companies that manage the royal dockyards. In that way, those who build the ships could, if equipped, compete with the royal dockyards for refitting contracts. Therefore, Vickers may well equip itself to compete with Rosyth in bidding for refitting work on SSBN Trident submarines.
Again to encourage competition I would expect my hon. Friend to ensure that the commercial management company that runs Rosyth is not the same as the commercial management company that runs Devonport because Devonport and Rosyth should be able to compete with each other. In this manner the two royal dockyards and the yards that build the ships will not only be able to compete for contracts to refit the simpler types of vessels—Royal Fleet Auxiliaries, offshore patrol vessels and the like—but will be able to compete for the refitting of complex type 22 and type 23 frigates, SSNs and even possibly SSBNs.
I regret that there has been only a short time for consultation, but I understand that my right hon. Friend the Secretary of State has not always been assisted by the trade union leaders in the dockyards. For example, they have not been prepared to distribute the booklets which have been made available. I have read some of the pamphlets which have been issued, which have suggested that pension and redundancy arrangements will be other than what they are actually to be, but the Government should have allowed a longer period for consultation. On the other hand, the Government have had the courage to address a real problem. It is a problem which everyone has acknowledged, but which only the Government have been prepared to face.
The Government have suggested that their proposed option is the one that is preferred by the Navy Board professionals who need the ships, and who operate them. The Bill is at least short enough and flexible enough to permit a variety of options to be considered. It is an important step in the right direction, and I commend it to the House.

Mr. Stuart Randall: I have no direct constituency interest in this enabling Bill, but I beg the indulgence of the House for a few minutes. I am probably unique in the House at this moment because


I am an ex-dockyard apprentice. I served my apprenticeship for five years at Her Majesty's dockyard, Devonport, and joined the electricians' union at that time, which was in 1953. I am extremely proud of the training which I received. The apprenticeships that used to exist were of an extremely high quality. That can still be said of some apprenticeship schemes. The skill level of many of those who work in the dockyards is extremely high.
I am worried about this enabling Bill. We seem to be embarking on a course that will take the dockyards into some commercial management. Presumably, the motive behind that is to cut costs. It is important to remember that we are dealing with the Royal Navy. We are talking about a force which has to be in top-line condition all the time. I am fearful of some of the analogies which have been drawn today. For example, it is not possible to compare the dockyards with areas in which I have worked such as the motor industry, the steel industry, information technology or banking. Direct comparisons of that sort cannot be made.
Modern ships—whether they be surface vessels, submarines or carriers—are extremely complicated and immensely complex. It is necessary to have a skilled work force to ensure that refits, for example, are carried out expeditiously and efficiently when required. It is important to recognise also that in the event of conflict, such as the Falklands war, our work force can respond expeditiously. I fear that the Government's proposal is one that could cause a depletion of the work force. The skills that now exist in the dockyards could be lost because of the uncertainty about the terms and conditions of employment.
Under the proposed arrangements highlighted in the Bill, an employee will join one of the private companies that receive contracts. When a company has completed its contract, the individual employed on a dockyard project will be finished. That is not the way to keep together a work force which must be of an appropriately skilled level to ensure that our Navy is in tip-top fighting condition. We are talking about ensuring that one of our key services is kept in that condition.
I am worried about some of the remarks during the debate about management reorganisation in the event of a conflict. We all know only too clearly from the Falklands that the time scale is short when we are faced with a conflict. I am sure that we all remember the short time that we had to get the task force steaming south. I have no doubt that there was early intelligence, but by the time decisions had been made, we were left with only a short interval before the task force had to leave for the south. It would not be possible to reorganise management in such a short time.
One of the great strengths of dockyard employees and the management structure is that they are pretty good at sorting out complex problems quickly. When I served at Devonport, we used to hear stories and tell stories about how we could lick the Americans. When the American fleet was tied against the sea wall, our fleet was out exercising and performing various tasks that the other NATO navies were unable to do. That is of great credit to dockyard employees and the management. We must remember that wars are won by those behind the scenes as well as by those at the front line. Of paramount importance are those who ensure that our Navy is properly

equipped and that our vessels are serviced to the highest possible level. Without that support, our front-line troops are seriously impaired.
I know that the people of Devonport have been loyal. I cannot speak for Rosyth because I have not had experience of it. However, my hon. Friend the Member for Clackmannan (Mr. O'Neill) will be speaking about Rosyth. The loyalty of those at Devonport has been genuine, and I do not say that in a debating sense. They have the ability to respond.
We must be careful about the readiness of the Royal Navy. It seems that we are engaged in a cost-cutting exercise, and we must not compare the Navy directly with, for example, ordinary manufacturing industry. It is clear that the Navy is a different kettle of fish.
We can test the Government's proposed reorganisation only in the event of a war. I, like many others, would be dismayed to find that in the event of a war the Royal Navy was unable to get to sea to perform in the way in which it should because of the reorganisation of the dockyards following the passing of the Bill.
This is an unfortunate measure. It is an enabling Bill and we do not really understand what it means. I share the opinion of many hon. Members that it has serious shortcomings. It seems that it will not save us very much expenditure and that any savings will be accompanied by many uncertainties. I hope that we are not penny-pinching at the expense of the efficiency and effectiveness of the Royal Navy.

Mr. Neil Thorne: My colleagues who have followed the proceedings of the Select Committee on Defence will know that I believe wholeheartedly in privatisation. I place it second only to the defence of the realm.
The Select Committee on Defence went to considerable trouble and considered the Bill in great detail. After examination of the various proposals, the Committee concluded that it was not a good idea for the Bill to proceed in its present form. The Select Committee was chaired by a Conservative Member and, of course, had a Government majority. The loyalty of the members of the Select Committee was with the Government in general outlook, but they believed that matters were not being considered from the right angle. They believed that the attitude of the trade unions had changed considerably during the past Few years and that the Government's premise for promoting the Bill seemed to be based on what happened many years ago. The Government are determined to make the trade unions understand the facts of life about what works and what does not work. The hon. Member for Kingston upon Hull, West (Mr. Randall) mentioned that he joined the electricians' union, which I am glad to see is in the forefront of realism in commercial affairs because it takes a realistic line on what does and does not pay.
We must carefully consider the proposals. The Public Accounts Committee estimated that the savings likely to result would be restricted to 1 per cent. If that was the estimate before the trade unions saw the light, the margin must now be smaller. If so, are the Government considering the matter properly and effectively? I am not sure that they are.
We must consider the matter in further detail. The Select Committee concluded:


We agree that the objective of infusing the Royal dockyards with entrepreneurial dynamism and a spirit of competition is a laudable one. The question is how best to achieve this end. The main benefit arising from the 'preferred option' would appear to be the transfer of 19,000 employees from the Civil Service establishment and from the constraints of Civil Service management.
If that is the main objective—I understand the Government's wish to pursue their manpower targets—it is not a sufficient reason to put at risk the defence of this country.
There are many good reasons why some aspects of the defence industry should be privatised, wherever possible, but it does not follow that this is such a case. If the Government are convinced that an experiment in privatisation would work—I am one of those who doubt that—they should pursue the possibility of privatising some yards. There is no earthly reason why all the yards should be privatised at the same time. Geographically, the yards are far apart and there is a good reason for dealing with them separately. That would not achieve the 19,000 transfer objective, but the defence of the country is more important than reaching a manpower target. The Committee concluded:
We urge the Government to approach the debates on the Dockyard Services Bill with an open mind and a readiness to draw fully upon the opinions expressed from all quarters, in the best interests of the fighting efficiency of the Fleet and of the defence and security of the nation.
That is precisely what every hon. Member should be working for. I urge the Minister to justify how the Bill will meet those criteria.

Mr. Gordon Brown: We are debating a proposal that destroys three centuries of dockyard service to the nation, threatens the readiness of our Navy for the task of peace and war and puts at risk the seagoing efficiency and the fighting effectiveness of 50 surface vessels and a score of submarines. The proposal has grave consequences for the future of jobs and conditions of service of a loyal work force of about 20,000 civil servants so recently and universally praised for their dedication in the Falklands campaign. When we debate these matters, the least that the House has a right to expect is not only the attendance of the Secretary of State for Defence and less filibustering from hon. Members such as the hon. Member for Tayside, North (Mr. Walker), but proper information, adequate consultation and a detailed justification, which was missing from the Minister's speech.
At best, we have had not a defence of the future arrangements for the royal dockyards but an attack on the present arrangements in the dockyards. There has been no argument in favour of the proposed management change. Instead, we have had the assertion that there should be a change in the management. The assumption that underlies every policy of this Government is that the public sector is wrong by definition and that the private sector is right because it is the private sector.
I remind the hon. Members for Bristol, East (Mr. Sayeed) and for Tayside, North, who are no longer present, that we are discussing a privatisation proposal that has been rejected by every Committee, including the Mallabar, Speed and Hudson committees, that has reviewed the future of dockyard arrangements since the

war. The proposal has found no favour in any country that is faced with the responsibility of refitting, repairing and maintaining the most sophisticated naval vessels and submarines. Since its disclosure 18 months ago, the proposal has been opposed by every organisation and individual, almost without exception, that has examined it. As the hon. Member for Ilford, South (Mr. Thorne) reminded the House, since its publication, the proposal has evoked the unparalleled and unprecedented rejection of two senior Committees of the House and the outright universal opposition of the highly skilled work forces at Rosyth and Devonport. But this privatisation proposal is presented to the House almost unchanged since the original sketchy six-page prospectus was produced by Mr. Peter Levene.
The House must ask, and Conservative Members would also question if they were here, whether Britain will be better defended, more secure, safer and more efficiently defended if some of the most lethal weapons known to man are refitted by an untried operator working under untested arrangements with a work force of uncertain size over which there is as yet an unspecified amount of public control.
There is no clause or subsection in the Bill to prevent the work forces of Rosyth and Devonport from being run down to a core without any capability or capacity in an emergency. Nor is there anything in the Bill to prevent the franchises for Rosyth and Devonport from falling into the hands of a foreign cartel. There is nothing in the Bill to protect the Navy against the hazards of City and stock exchange finance, or even the coincidence of inernational crises and emergencies with awkward periods of contract changeover or inexperienced operators beginning their contracts. That is why one of the Minister's civil servants said to the Select Committee that the preferred option is the high-risk option for the Navy.
What conceivable benefits could justify the uncertainties and disruption of this privatisation measure? For six years, we have been told by the Government that the merit of privatisation is that it offers us a people's capitalism through individual share ownership and economy through competition. Yet if nothing in the Bill will achieve those objectives, if nothing in the Bill will permit mass capitalism by share ownership because no shares will be sold and only the franchise for the dockyards is on offer, if nothing in the Bill will extend real competition because with one Navy, only two dockyards and two companies in control the Ministry of Defence will inevitably be a captive buyer from private monopoly suppliers, and if nothing in the Bill will reduce the public sector borrowing requirement because all new investment in the dockyards will be the responsibility of the Government and not the private operator who takes over, we must conclude that the Bill represents privatisation for privatisation's sake, based on an unsupported assertion that the private sector is right only because it is the private sector.
The main purpose of the exercise—the only conceivable justification that the Minister could put forward for this colossal gamble with our Navy and our defences—is to cut costs and save cash. The original Levene report said that the purpose of the scheme was to save money. In the open government document issued a few months ago, entitled "The Future of the Royal Dockyard", the stated aim was the cutting of costs. In the Gracious Speech, the privatisation experiment was described clearly as being designed to secure


value for money in spending on defence.
Vice Admiral Tippet told the Select Committee on Defence that there would be "substantial savings" as a result of the changes.
What does "value for money" mean? What are "financial economies"? What are "substantial savings" in practice when, according to the financial statement in the Bill, the changes,
are unlikely to have a major effect on central Government expenditure"?
I remind Conservative Members of the point that I put to the Minister this afternoon. Even under the Government's most dubious reckonings, the minimum saving will be only £18 million, and the expected saving is only between £29 million and £33 million a year. When set against the alternative of a trading fund, which has been costed by the Government, those savings are reduced further to a minimum of only £10 million or, at best, between £21 million and £23 million. When set against the implementation costs of the scheme in redundancy payments, transitional costs and consultancy fees—we are told that implementation will cost about £60 million —the savings will be reduced by at least another £6 million a year, taken on a 10-year basis, and the savings then decrease to a minimum of £4 million, or £15 million at best. Since, in addition, up to £200 million will be paid to set up a private pension scheme, the conclusion that we must reach is that there will be no savings in 1987, no savings in 1988, no savings for the rest of the decade and that there are unlikely to be savings in the 1990s, if the scheme is properly costed, given all the additional initial expenses that are involved. There will probably be no savings even as we move into the first years of the 21st century.
It is hardly surprising that the Public Accounts Committee, concerned more with financial reality than with economic theory, was neither impressed nor convinced by the financial information produced by the Government. The PAC concluded that the evidence from the Ministry of Defence was
among the worst we have received during this Parliament. The calculations given provided us with no valid bases on which to judge whether any increase in efficiency would result from the Government's preferred option.
The Minister gave us new figures and new percentages on the core programme, including the costs that would be met by competition, the costs that would be met by fixed-price contracts and those that would be met by cost-plus arrangements. He appeared to say that fixed-price contracts would operate, but not for the first two years, not for 25 per cent. of the work in the next five years, not presumably for emergent work which could not easily be covered under the arrangements, and certainly not for unprogrammed work, which could not be covered under the present arrangements, and certainly not for unprogrammed work, which could not be covered under the present arrangements. Is it any wonder that when Touche Ross, the consultant to the Ministry of Defence, examined the proper financing of dockyards put into the private sector, it concluded that if it estimated what the dockyards would cost to run on a market basis, it had better include a 10 per cent. mark-up on existing prices for the profit margins that would be required by a commercial contractor? I presume that the document produced by Touche Ross is supported by the Ministry of Defence dockyard planning team, in whose name it it published.
The Government's argument is that throughout the exercise there will be substantial savings and no risk. The truth is that there will be no savings and substantial risks.
My right hon. Friend the Member for Blaenau Gwent (Mr. Foot) mentioned the Admiralty Board, which seems to be the only respectable supporter that the Minister can claim for his scheme. My right hon. Friend cited Rear Admiral George's evidence to the Select Committee on Defence, when he said:
It is largely the pressures on the defence budget which have led the Admiralty Board to consider matters of saving money.
The Board went even further in its evidence and said that it could see the benefit to the Navy in terms of the release of resources which should be capable of being used for front-line activities within the Navy. The board supported the proposals because the Minister told it that the scheme would produce savings. I understand that the Admiralty Board is not composed of simple sailors who might be expected to succumb to the wiles of a City operator, even one dressed for the occasion in a combat jacket. But the board has been taken in by the glossy financial prospectus passed round by the more dubious variety of secondary banks and, having been thoroughly misled by the Minister, now discovers that its puzzled assent to the scheme is about the only evidence that the Minister can cite in his favour.
If the Government cannot tell us where the scheme will produce savings, should they not tell us about the risks that it involves? In a matter so grave as national security, the House has a right to demand and to expect proper safeguards. But where are those safeguards in the Bill? Where are the safeguards to ensure the maintenance of a strategic minimum capacity? Where are the safeguards that we shall maintain an emergency capability in the dockyards at times of international crises? There is nothing in the Bill about that. Where in the Bill are the safeguards on nuclear safety, when the responsibility for radiological protection will be with the contractor who takes over the dockyard and the responsibility for the removal and transportation of nuclear waste and radioactive substances will be with the Ministry of Defence?
Where are the safeguards in the Bill to prevent our submarines from being refitted fender to fender with Russian trawlers? That is unknown in the public sector, but is clearly known in the private sector, because only a few months ago the submarine HMS Otter was photographed undergoing a refit on the Humber side by side with a Russian trawler. If there is a bar on countries that are unacceptable for strategic reasons for giving their naval refit work to the newly privatised dockyards, the dockyard planning team and Touche Ross seem to be unaware of it. Why did Touche Ross, presumably on the information given by the dockyard planning team, say in the report simply that the Communist world was "virtually certain" never to wish to negotiate the use of the dockyards? It says not that they will be banned from using the dockyards, but that they are almost certain never to wish to use them. In other words, the reason that there will not be Russian trawlers in the dockyards is not the Government's unwillingness for ideological reasons, but the unwillingness of the Soviet or Communist bloc to use the dockyards.
Why are countries that are wholly unacceptable to us, such as Chile, South Africa and Argentina, cited in the document as only "unlikely" to be wanting work done within the dockyards? Why is it said that, even though


they are unlikely to want major refits in the dockyards, they may require specialist refit work to be done? Is it not amazing that the dockyards planning team has put its name to a document that says that it is possible that specialist refit work will be done on behalf of Argentina, a country with which we have no diplomatic relations, or South Africa, which has been condemned in the House and elsewhere?
Will Britain be better defended if the other countries listed require naval refit work to be done in the newly privatised dockyards, or if Chilean, Pakistani, Bangladeshi, Indonesian or Algerian frigates or sub-marines are refitted side by side with our independent nuclear deterrent at Rosyth? The Minister may say that this is not possible and that the Government will not allow it to happen, but there is nothing in the Bill to prevent such an extraordinary situation emerging and nothing in the advice that Ministers have given to the dockyards planning team to prevent it happening.
There is another even more important point that Ministers seem to have overlooked. Where are the safeguards about continued British ownership of companies awarded the franchise, which may even be trusted with the responsibility of refitting the Polaris nuclear deterrent? There are no safeguards in the legislation about foreign control of the companies that will allegedly run the royal dockyards. We cannot anticipate safeguards even in the contracts or the articles of association, for even with the proposed golden share there can be no safeguards that are finally binding on the operating company.
While a golden share may prevent Rosyth plc or Devonport plc falling into the hands of foreign shareholders, it can do nothing to prevent the company which holds the franchise—the major operating company awarded the franchise by the Government, the Balfour Beatties, the Weir groups, or the Thorn EMIs—from falling into foreign hands. Assurances from Ministers about what may happen are not enough if they are not prepared to stipulate in the legislation that the contract will be removed from any dockyard company at either Rosyth or Devonport if a certain number of shares in that company fall into foreign hands.
This is what Tory patriotism now means. In their effort, because of their enthusiasm for privatisation, to transfer the dockyards from public control to private control, Ministers are prepared to contemplate the final transfer of the dockyards from British control to foreign control. That is the end effect of the Bill's proposals, if they are not changed.
Let us consider some of the other assurances missing both from the Bill and what the Minister said today. Where are the assurances sought by my hon. Friend the Member for Dunfermline, West (Mr. Douglas) about the continuation of apprentice training for the dockyards? What possible initiative will there be for a private company working on a seven-year contract to maintain the levels of apprentice training at the dockyards that have been vital for the maintenance and development of the local economies? Where are the assurances of proper public audits of what happens in the dockyards under private control? Where are the assurances about the proper line of separation between a dockyard under private control and the naval bases under public control? As long

ago as 1971, the Mallabar committee identified this as a major problem in examining any agency management scheme.
Where are the assurances about the role of dockyards under private control in the serious matters of nuclear safety and war planning? Some 18 months after Mr. Levene produced his original document, a year after the Minister said that he would be prepared to go ahead, nine months after the Admiralty Board was duped into saying that no risk was involved because it thought that there would be savings, and six months after the Government approved the privatisation and said that they would introduce legislation, none of the problems has been solved. Some 18 months after Mr. Levene reported, there are now 19 committees in the Ministry of Defence examing the fundamental issues about which we warned 18 months ago, the resolution of which is at the heart of the viability of the scheme and at the heart of whether the nation can, for security reasons, afford to go ahead.
When the Ministry of Defence committees report, the only answer that they can give is that we must simply hope and pray that international crises and emergencies such as the Falklands do not coincide with awkward periods when one contractor is being replaced by another. We must hope and pray that the crises that may arise do not coincide with an untried and inexperienced operator starting on a new contract. We must hope that the crises do not coincide with there being a competitor at the end of the term of his contract, just waiting to get out and with no reason to put his resources into doing the job.
We must also hope that the dockyards will not be held to ransom by a private monopoly supplier refitting the nuclear deterrent or any other frigates or submarines. We must hope and pray that the dockyards can quickly adjust if the City sneezes, a company goes under, a dockyard consortium collapses and at short notice we must regain public control.
Let us remind ourselves what might have happened if the enthusiasm of the Secretary of State had excited the Cabinet as early as 1979 and if the Cabinet had convinced itself of the merits of a dockyard franchise. What would have been the consequences for the Navy's unpredictable requirements in 1982 if we had been engulfed in the first changeover and if a new operator was learning by his mistakes, at our expense? What would have happened if the operator was incapable of rising to the occasion, if hundreds of men had been sacked and there was no capability to deal with emergency refits that had to be done to get the Falklands fleet to sea, or if the Navy was simply held to ransom by prices being demanded by the private supplier for unprogrammed work? What would have happened if, because of the new commercial disciplines applied to the dockyards, managers and men refused to work night and day as they did during the Falklands crisis to get the fleet to sea? Might the Navy, just because of the vagaries of the Stock Exchange, have found itself conducting the Falklands war over the debris of the bankruptcy of Rosyth plc or Devonport plc?
There are no watertight safeguards written into the Bill about the protection of our strategic defence or about our ability to respond in a crisis. There are no safeguards and guarantees because there can be none when the purpose of the exercise is to subject the dockyards, our last line of naval repair and maintenance, to the risks, uncertainties and vagaries of the market economy.
I accept that the Navy recognises that this is a problem. When it was asked in the Select Committee by my hon. Friend the Member for Dunfermline, West what guarantees there were about the refitting of our strategic nuclear deterrent in the case of emergency, the whole argument about commercial management was exploded. The Navy spokesman told us at that Committee that we were not to worry. We were told:
There is no reason why the existing management at that level should change.
Having decided that the existing management should be revolutionised by privatisation, the Navy now seeks to reassure us that the principal safeguard for the Navy is that the management will not change. That is a guarantee that the Navy spokesman could not give, because they are in no position to give any guarantee about the management that would be involved in the nuclear deterrent or any other project under a privatised operation. If the real safeguard for getting our frigates, submarines, destroyers and Polaris out to sea is that management will not change, what is the argument for a change in management?
During this debate, the dockyards have been subjected to some criticism, especially that levelled at them by the hon. Member for Tayside, North. When Conservative Members criticise the dockyards for their productivity they should remember that the productivity of the Devonport dockyard has, according to Navy spokesmen, increased by 17 per cent. over recent months, and that productivity at Rosyth dockyard has increased by 15 per cent. over recent months, and done so while the dockyards have remained in the public sector.
When Conservative Members seek to criticise the dockyards for their inefficiency, they would do better to look at the comparisons between the public and private sector. The hon. Member for Tayside, North seemed to forget that only a few weeks ago, in one small minor refit, Rosyth dockyard had to pick up the pieces after 28 defects were identified following the refitting of a frigate in the private sector.
When Conservative Members consider the comparison between the public and private sectors they should remember that every report since the war, while critical and asking for improvements in dockyard management, has asserted clearly that the dockyards have no rival in the private sector for cost, efficiency and ability to deliver on time.
The Government are putting forward the proposals only because they believe that the private sector is better as an act of dogma. They should remember that Rear Admiral Leach, formerly head of the fleet, not only praised the dockyard work force for what they did in the Falklands campaign but asked Ministers, in a letter in the Financial Times a few months ago, how, after all the effort that had been put into the dockyards, they could justify their being kicked in the teeth.
What has changed in the dockyards since the Speed report, the Hudson report and the Mallabar report concluded that agency management was unacceptable? What has changed since the Mallabar report concluded that agency management was the way to get the worst of both the commercial and Government Department worlds?
What has changed since the Speed report concluded that the disadvantages of agency management were that the management would have little incentive to make itself more efficient, while the usual justification for an agent was that he had the resources and skills of the parent firm

to fall back on, something which would not exist when the dockyards were privatised? What has changed since that report said specifically that the contracts put out for agency management could
not lead to competition and genuine incentive
but would lead to
confusion over who was responsible for what"?
What has changed since that report said that there would be no guarantee that
An agent would provide the capacity to meet urgent and unprogrammed work to maintain the operational capability of the fleet,
or that the Secretary of State would retain his flexibility to move work between the royal dockyards?
What has changed since the Mallabar report, the Speed report and the various other reports? Is it the role of the dockyards that has changed? Is it the Navy's demands that have changed? Is it the sophistication of the refitting exercises that has changed? Or is it simply that the Government Front Bench has changed, given the obsessive desire of its members to pursue privatisation at any cost and to prove that anything can be privatised, including the royal dockyards?
The Secretary of State has put forward a scheme whose very basis criticises a loyal, efficient and dedicated work force. It is a work force that was not only praised for what happened in the Falklands campaign and which has not only increased productivity over the past 18 months by the figures that I have mentioned. It is a work force that has said clearly that it is prepared to consider proposals for change as long as the Minister removes the threat hanging over the dockyards under the Levene proposals. That is not a work force that is inflexible and resistant to any change, but one that is rightly resistant to the unilateral imposition of change by a Minister who is unprepared to consult, unwilling to listen and has not even bothered to have meetings with the unions in any detail over the proposals that he puts forward.
On the other side we have a Secretary of State for Defence who is not really a Secretary of State for Defence but simply a Secretary of State for the defence of the private sector. He prides himself on his patriotism but he is ready at any time to subordinate the interests of national defence to those of commercial gain. Dogma rather than evidence tells him that the dockyards have only one outstanding feature which is their principal shortcoming and that is that they are not run by the private sector. He has convinced himself that the dockyards can be put right only by applying the dogma of privatisation. Somehow he believes that what is good for Plessey, Babcock and Thorn EMI is automatically good for the British Navy, when he knows perfectly well that the first loyalty of the cartels and consortia who will take charge will be not to the fleet but to their companies' balance sheets.
There are more than 8,000 public servants at Rosyth and more than 12,000 at Devonport who have been forced by the Government's misguided policies to the front line of a privatisation war that they did not seek. They understand that the national interest is more than the sum of the private parts of the economy. Their loyalty, dedication, years of service and sense of the public interest is well known and well understood here and in Britain. Throughout the past 18 months the Minister has sought to justify the privatisation scheme by promising the Navy Board and the country that he would achieve savings. Now that that argument clearly cannot hold up after the


evidence to the Select Committee on Defence and the Committee of Public Accounts, what possible justification can the Minister give us for proceeding?
Labour Members will continue to oppose what is a reckless gamble with the nation's defences and the country's jobs. We shall have the unanimous support of the work forces at Rosyth and Devonport. We believe that during the period of consultation we have gained the support of people who have hitherto been adherents of the Conservative party. We can see tonight that those Conservative Members who have bothered to study the implications of the scheme will vote against the proposals when they are put to the vote.
We believe that in Committee, when the Government are forced to face the arguments about cost and the lack of proper safeguards inherent in the Bill, they will have to change tack. At the very least, we expect the Minister to answer the questions being put to him by Labour and Conservative Members. He should tell us what capability will remain in Rosyth and Devonport dockyards to deal with an emergency. He should tell us what he proposes to do to prevent foreign control of the companies which run the dockyards and what arrangements he will make to prevent foreign naval refits being carried out side by side with refits of our frigates, submarines and nuclear deterrents. He should tell us what he means about the likelihood of jobs and apprenticeships remaining in the dockyards under the contracts that are brought into being. Above all, he should tell us the truth about the real cost of this scheme to the defence budget and to the public expenditure budget.
If the Minister of State told us the truth about his proposals for the defence of the nation and for jobs at Rosyth and Devonport, there would be not one or two but a large number of Conservative Members joining us in the No Lobby tonight. That would make it impossible for him to proceed with the Bill.
The Bill is bad for the Navy, for the work forces at Rosyth and Devonport and for the country as a whole. The Minister of State would be doing a service to the country if he withdrew his proposals.

Mr. Michael Hancock: May I draw the attention of hon. Members to what has happened in Portsmouth. At the 1979 general election a Conservative party leaflet was headed "Defence of the Realm" and contained the simple slogan
Your jobs and our dockyards are safe in our hands".
There were 6,500 employees in the Portsmouth dockyard in 1979; today, there are just over 2,000. So much for the jobs in Portsmouth that were safe in the hands of a Conservative Government.
Despite the Secretary of State's answer to the hon. Member for Portsmouth, North (Mr. Griffiths) that there would be no job losses at Portsmouth, this measure to privatise the dockyards at Devonport and Rosyth will have a knock-on effect at Portsmouth. The industrial pay records will not come to Portsmouth. Consequently, the jobs that were promised have been lost and future jobs will also be lost. As 15 per cent. of the capacity of naval stores will be lost at Portsmouth, there will have to be cuts.
The Secretary of State for Defence, by his absence today, is treating the House with contempt. He is also

treating the people of Rosyth and Devonport with contempt, and, to a lesser extent, the people whom I represent. He may be exploring the bolt-hole that is contained in the Bill. It is strange that the only measure before the House this Session that relates to defence contains a bolt-hole that enables the Secretary of State for Defence to get off the hook if this piece of garbage—that is the only word that can be used—is passed.
The Bill has not been thoroughly prepared. The House should have been provided with the answers to the questions that the Secretary of State has posed to his departmental heads. If there were answers to those questions, there would be no need for 19 working groups to be set up. The questions that the working groups are to explore are fundamental to this legislation. Is the Minister of State suggesting that we do not have the right to question him and get answers about the effect upon the fleet maintenance bases and upon naval manpower? Is he suggesting that the House has no right to expect answers from him on the vexed question of war planning? The Bill should not have been introduced until the Minister of State was able to answer those questions.
It is interesting that the Minister's Department put some very interesting questions to the work force. The dockyard planning team's quarterly review suggests that several questions remain unanswered. I hope that the Minister of State will be able to give us answers to those questions. The Minister's opening speech and the speeches of his right hon. and hon. Friends lead me to believe that the answers are only in the minds of the mandarins in his Department. They are certainly not in his mind.
Is the Minister able to tell the House how material will be supplied to the dockyard companies and how the refitting and repair of ships other than warships will be handled? Will the land, buildings, machinery and facilities of the naval bases be made available to commercial operators? How will naval base organisation be affected? How will the CED's current responsibilities outside the dockyard be undertaken? How will nuclear safety be assured? This point was raised by the hon. Member for Dunfermline, East (Mr. Brown). How will environmental safety be assured? How will the fleet maintenance bases be affected? How will the changes affect the conditions of service of civilian employees? What will be the effect on Royal Navy personnel? What will be the effect on war and emergency planning? How will quality assurance be maintained? How will the Royal Maritime Auxiliary Service and harbour services be provided? How will transport services be provided? What new financial and accounting systems are needed? What measures are required to maintain security? What are the future computer needs? How will design and support information be supplied? What needs to be done to maintain the protection of Government and commercial information?

Sir Antony Buck: Will the hon. Gentleman give way?

Mr. Hancock: No, I have waited too long to make this speech to be interrupted at this stage, particularly by hon. Members who have not participated in the debate.
Those questions should be made the subject of close and rigid examination. However, all that we get from the Minister of State is a smile or a smirk. That does not offer to me the kind of satisfaction—

Sir Antony Buck: Will the hon. Gentleman give way?

Mr. Hancock: No, I am not prepared to give way.
We need answers to those questions from the Minister of State. We should not have to wait until the Bill reaches its Committee stage. The mere fabric of the Bill demonstrates that the exploration of the possibilities will be very limited in Committee. Who will the Minister of State listen to if he does not listen to hon. Members? Will he assure us that the reports of the working groups will be made public to those hon. Members who deal with the Bill in Committee?

Mr. Norman Lamont: indicated dissent.

Mr. Hancock: The Minister of State shakes his head. We are not to be provided, even then, with the answers.
My right hon. Friend the Member for Plymouth, Devonport (Dr. Owen) has made quite clear where the alliance stands on this proposition. He has the support of the whole of the alliance. My right hon. Friend the Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel), the leader of the Liberal party, has been to Rosyth and spoken to the unions. My hon. Friend the Member for Orkney and Shetland (Mr. Wallace) has also spoken to the unions at Rosyth. He has pledged the wholehearted support of the alliance in the battle to prevent this bit of nonsense becoming law.
The Public Accounts Committee's report made six valid points, to which I hope the Minister of State will be able to give answers. The Committee found that all the options discussed by defence open government document 85/01, including both commercial management and the trading fund, have not been accurately costed by the Government. Secondly, there is no clear-cut evidence to suggest that the Government's option is more efficient. The Committee could not be certain that the Government's calculations were valid. Those are real doubts on two points of finance.
The third point is whether the commercial refit comparison exercise is a prudent step—two ships being refitted in the commercial sector and two in the dockyards. I have tried repeatedly during the past couple of months, through questions to the Department, to obtain comparisons, but it appears that we will not be told how much it will cost to have ships refitted in commercial yards. We are not to be told whether that compares favourably with the costs of refitting at either Rosyth or Devonport. Yet again we are not to be given the information that we need if we are fairly to judge whether the Government's policy—

Mr. Norman Lamont: Surely the hon. Gentleman would not expect me to disclose the prices actually being charged by different companies tendering for work.

Mr. Hancock: In a recent reply to me the Minister suggested that, eventually, we might obtain the figures. Surely the appropriate time for that is when the Bill is being considered by the House so that a fair and accurate comparison can be made. Unfortunately, Conservative Members—

Sir Antony Buck: Wait for the Committee.

Mr. Hancock: The hon. and learned Gentleman might say that, but when I mentioned the possibility of obtaining those answers in Committee the Minister shook his head. There are grave doubts whether we will obtain the answers before the House debates the final stages of the Bill.
Many other points have been raised in various Committees about the fundamental mistakes being made by the Secretary of State and his colleagues, and the route down which they are leading the House and the country. Hon. Member after hon. Member has condemned the proposal. The defence of the work force has been explicit in speeches from both sides of the House. We hope that the hon. Member for Plymouth, Drake (Miss Fookes) will not just abstain tonight, but will support the Opposition parties, which are trying to expose her colleagues in the Government to the test of public opinion in her constituency. I hope that she will support those who sent her to this place by rejecting the Bill.
The arguments against the Bill are legion. The strategic fighting effectiveness of the fleet will be affected. Indeed, even the Government's handout questions whether an effective, efficient Royal Navy will emerge in the same form as it is in today. Parliamentary control and accountability will be diminished by the very act of privatisation. The dockyards will not be accountable to this place. The Government's proposal will severely test the morale of the work force and diminish what prospects it has of a future within the Civil Service.
If Conservative Members do not believe that, I urge them to draw on the experience of Portsmouth dockyard, which has been through a traumatic time. Its work force was completely sapped of morale. Some of its best craftsmen—those whom the Ministry of Defence could least afford to lose—were the first to go through the door because they were sick to death of the Government playing about with their futures. Surely the Government must learn from their mistakes at Portsmouth.
It is no good the Government adopting an ostrich-like attitude, believing that that experience cannot be repeated. I should be foolish if I were to believe that that same experience will not occur at Rosyth and Devonport. Those who care most will look for other jobs, because they do not want their jobs to be hung on a thread at the whim of a commercial contractor, or on whether that contractor has the gall or the substance to deliver the goods to the Government.
As surely as tomorrow will come, there will be doubts about the contractors. The substance of the job is so large and so complex that many of the contractors will not have the expertise required to maintain the efficient and effective work force that is so necessary if we are to maintain the defence of the realm at the level that we have come to expect.
As other hon. Members have said, the contractors can hold the Navy to ransom. My right hon. Friend the Member for Devonport said that it was not privatisation, but piratisation. Indeed, there will be land-based pirates holding the Navy to ransom. The ships will be tied at the quayside when we want them at sea.
I urge the Minister to take back to the Secretary of State the true voice of the House. It is not the response in the Lobbies of the unseen Members who have not been present today, but who will suddenly appear out of the woodwork at 10 o'clock. It is the feelings and opinions of Members who have attended the debate and who care enough about the issue to voice an opinion. The Minister must tell his right hon. Friend that when the chips are down, those who work in the dockyards at Rosyth and Devonport will respond to the country's needs—if that is put to them properly and if they are given the trust and the dignity that they deserve.
When the House met to discuss sending a task force to the Falklands, redundancy notices had been issued to the work force in Portsmouth and then withdrawn. Had those Nott cuts been introduced six months earlier, Britain could not have got that task force to the Falklands. The Hermes would not have been in a suitable condition to lead that force. Although the workers of Portsmouth had been issued with redundancy notices and had the prospect of being without jobs later, they responded magnificently, because they put the national interest first. The same can be said of the workers of Rosyth and Devonport.
It is wrong for the Government to take the action that they are contemplating in the face of such loyalty and commitment. By attempting to rub out, as it were, hundreds of years of committed work by the people of those areas, they are doing a disservice to themselves and the nation.
Apart from many hon. Members feeling that the Bill will not achieve what the Government say is their purpose, the Government must have great reservations about the measure. After all, 19 working parties would not have been established if the Government had answers to the many questions that have been posed. Those questions should have been answered long before this stage. Indeed, if the Government did not have doubts on the issue, the Secretary of State would have been here to present the Bill on Second Reading. Because of his doubts, the right hon. Gentleman did not change the date of the debate to suit his arrangements.
As my right hon. Friend the Member for Devonport pointed out, the Select Committee on Defence said:
We urge the Government to approach the debate on the Dockyard Services Bill with an open mind and a readiness to draw fully upon the opinions expressed in all quarters in the best interests of the fighting efficiency of the fleet and the defence and security of the nation.
In that connection, I refer again to the Conservative election leaflet in Portsmouth. It was headed:
The Conservative party and its caring defence of the Realm.
The Conservatives have failed the people of Portsmouth from 1979 right up to the present. Indeed, I am living proof of that, for I would not have been elected had the Conservatives lived up to their promise to save the jobs of the people in the dockyards.
I urge the Minister to express the voice of Parliament to his right hon. Friend, and by that I mean the views of hon. Members, and not simply the voting figures in Divisions in the House. We do not want pirates in our dockyards. We want dignity, loyalty and efficiency. Those qualities exist now. I fear that they will be lost if the Government's proposals go ahead.

Mr. Albert McQuarrie: I regret that the hon. Member for Portsmouth, South (Mr. Hancock) refused to permit my hon. and learned Friend the Member for Colchester, North (Sir A. Buck) to intervene while he was speaking, because my hon. and learned Friend would have raised points of considerable importance to hon. Members on both sides of the House who will be taking part in the Committee proceedings.
It is nonsense to suggest that once the dockyards are commercialised the good workmanship and management

expertise that now exist in them will be lost. I speak from experience of having taken a considerable interest in a naval dockyard which has already been commercialised.
I draw the attention of the House to the situation in the naval dockyard in Gibraltar. That was a royal naval dockyard which was closed by the Government and became a commercial dockyard. When the Government decision was made to commercialise the dockyards, it was said that the operators would be chosen for their experience in running well-managed companies.
The hon. Member for Dunfermline, East (Mr. Brown), who has left the Chamber, complained about the small number of Conservative Members present. I do not see many Labour or Liberal Members present and there is only one Member representing the SDP. The concern expressed by one or two Opposition Members is not reflected by the number of Opposition Members present. The hon. Member for Dunfermline, East, in his sensational outburst, endeavoured to create the sort of emotionalism that can be generated when such matters are discussed. Therefore, it is important to look at the precedent set by the Gibraltar dockyard.
The hon. Member for Dunfermline, East asked what would happen to the Admiralty work. The Admiralty work continues in the Gibraltar dockyard, and 14 RFAs are scheduled to be built there in the next three years, at £14 million each. Therefore, there is considerable work to be done in the dockyard.
The hon. Gentleman asked whether foreign vessels would come into the dockyard. Foreign vessels went into the Gibraltar commercial dockyard and the base is still maintained. Labour Members should not let their fears run away with them in regard to running a dockyard on a commercial basis. There is a shortage of skilled people at Gibraltar as a result of the large amount of work generated by the commercial operator. There is a rig from Brazil in the dockyard. Foreign vessels have come in from Germany, and even Russian vessels have been seen in the dockyard in Gibraltar. [Interruption.] The right hon. Member for Plymouth, Devonport (Dr. Owen) failed Gibraltar when he was Foreign Secretary, before defecting from the Labour party to the SDP.

Dr. David Owen: Speak to Sir Joshua Hassan.

Mr. McQuarrie: I speak to other people than Sir Joshua.
The hon. Member for Dunfermline, East expressed his serious concern about total control leaving the dockyard. It must not be forgotten that the commercial dockyard, once established, will be an entity. The Secretary of State will set up the companies to employ the work force at the dockyard. The ownership of the companies will be assumed by the first contractors and then by any subsequent contractors.
The hon. Gentleman said that the Bill implied criticism of the work force. I have read every line of it and I challenge any Opposition Member to show me in the Bill one criticism of the work force. The work force should be given the opportunity to study the value of commercialisation in the shipyards and the dockyards. It will then see for itself the way to achieve continuity of employment.
If there were less scaremongering and a little more effort to ensure continuity of employment, it would be much better for the people concerned. It would be better than trying to raise the tempers of people who want a safe job and future for themselves and their families.

Mr. Martin J. O'Neill: Second Reading of the Bill marks a major debate on the dockyards. My right hon. Friend the Member for Blaenau Gwent (Mr. Foot) took us back to 1578 and the role of John Hawkins. As always, he enlightened many of us on the background. I do not propose to go back that far, but since 1970 there has been a succession of reports and investigations. It is perhaps not surprising that the last—and in some ways most important or significant—report is the smallest, the least respected and the most universally condemned.
As with so many matters relating to our national security and the Navy, national pride and the feeling that our fleet should get the best possible deal are always our prime concerns. Anyone who comes into contact with any of those involved, certainly in the dockyards, is left in no doubt that the loyalty, commitment and ingenuity of the dockyard work force and managers are beyond question. We have heard many tributes from both sides of the House not just to the contributions that they made to the Falklands war, but to their repeated ingenuity in dealing with difficult and often unexpected tasks.
My hon. Friend the Member for Dunfermline, East
(Mr. Brown) said that there have been recorded increases in productivity of around 17 per cent. in Devonport and 15 per cent. in Rosyth, at a time when Vice Admiral Tippet is saying that
there is very considerable apprehension in the work force as to the future.
A measure of the commitment of the men and women in the work force is the fact that, at a time when they have been treated so shabbily by the Government, when the consultative processes have attracted the opprobrium of both sides of the House, they have been prepared to work on in the national interest to prove to the country the quality of the work that they can produce and the industry of their effort.
A four-clause Bill with an almost neutral financial effect will be, as one official said,
a trivial element of the total of Government expenditure.
It will be only a "trivial element", but, at the same time, the turnover of the dockyards and the work involved is about £500 million.
The privatisation will not be subject to a flotation, as with British Telecom, or put into the queue, as with British Gas or British Airways, to fund the next election campaign, although some of the firms that have shown an interest contribute considerable sums to the Tory party as distinct from the public exchequer. The Bill is not intended to widen share ownership or to turn draughtsmen, fitters, pattern makers or boiler makers into a new generation of petty capitalists. We are told that the Bill will free the dockyards from the constraints of Civil Service control and remove the work force from the Civil Service altogether. The workers will not cease to exist, but their status, as my hon. Friend the Member for Dunfermline, West (Mr. Douglas) said, will be little better than chattel slaves moving between one contractor and another.
We have heard much about the prospect of unemployment, but we have heard precious little mention from the Government of the fact that 2,000 jobs will be lost in Devonport in the near future and 400 will be lost at Rosyth. While it is assumed that the other jobs will remain, the gratitude displayed by the Government to those people means that nobody's job can be regarded as

safe. The only consolation that my hon. Friend the Member for Dunfermline, East found was in the Touche Ross report, which said that there would be a possibility of obtaining contracts for the refitting of ships from the South African or Argentine navies.
As yet we do not know a great deal about agency management. When the Secretary of State introduced the open government document and started the so-called consultation period, he claimed that there were examples of agency management in the United States. There are, but they are concerned with military vehicles, arms and munitions. The Secretary of State was not to know this, but it is easy to see why his golden boy, Mr. Levene, knew about the suppliers of golden screwdrivers, and so on, because it was in that area of production that Mr. Levene made his reputation in Britain.
While there is no experience of a similar undertaking to Rosyth and Devonport in the United States, Peat Marwick's researches on behalf of Plymouth council show that there is a dockyard in Australia where 2,500 people are employed refitting six navy Oberon class submarines on a cost plus agreed profit basis. The common feature of the American and Australian experience is that in both countries the tender has not been transferred to any other firm since the scheme started. So much for the prospect of competition between firms and the prospect of change.
It is true that profitability has been high. However, there does not seem to be much likelihood of there being substantial savings to the taxpayer, as is hoped by the Minister of State. One of the most famous cases is the American firm, General Dynamics, the activities and contracts of which are still under suspension pending investigation by the American Government.
It is against that background that we are sceptical and incredulous at the Government's proposals. Horror has been expressed by virtually everyone who made representations. The Select Committee on Defence received only one piece of evidence in support of the proposals, which amounted to a nine-line letter, the first line of which reads:
Privatisation could put the Navy at risk in some circumstances.
Perhaps in the interests of brevity, Mr. Garnett decided not to go further, but starting off a letter of support like that speaks volumes for the extent of confidence in the proposals that those in the know have.
The Select Committee on Defence expressed disapproval of virtually every aspect of the Ministry's handling of the proposals. We had an interim report condemning them and calling for responses. We then had a statement from the Committee saying:
Our misgivings about the Government's intentions have not been allayed by the evidence we have been given orally and in writing since our last Report.
As has been said many times, the Committee is not made up of a majority of Labour supporters. The members of it are respected for their independent approach. While we might not agree with all of them, it is strange that on such a controversial issue, which is endowed with an ideological content, a majority of Conservatives should come out against the proposals in the frank way that they have. Members of the Committee raised substantial objections. They spelt out those objections in the first report, but the Minister's responses in no way modified their position in the second report. They identified as a major difficulty the discontinuity of management.
The Committee made it clear that a seven-year cycle could impede planning and affect morale. It has already been admitted that the work force is apprehensive about and has rejected the interim measures that the Ministry is endeavouring to pass. Anxieties have been repeatedly expressed about the problems of retaining British ownership of the companies that are granted franchises, and about the possibility that the parent companies of franchisers could be taken over by foreign enterprise. The Minister must satisfy the House and say why he is confident that that cannot take place.
By what mechanism can a British Government ensure that the parent company of one of the organisations responsible for carrying out the franchise work will not be subject to a foreign takeover, thus allowing the contracting company to become foreign owned? We will worry, and can only speculate, about the uncertainty during the period before a contract is renewed. Will the Minister tell us about the status of the contract during the year in which reselection will occur? Can he say something about management indifference following deselection, if that happens? We can imagine the Government's frustration if there were a short list of one which did not accord with the Government's wishes. In those circumstances, are the Government prepared to put in their own nominee, as the Conservative party usually does on such occasions, or, as the Government sometimes do in extremis, to nominate themselves? Officials have recognised that in their discussions with the Committee. They admit that there may be a short-term problem of managing transition. It may be short term, but it will be serious if nuclear work must be done.
Many people are greatly worried that the work group, which is responsible for nuclear maintenance work, is skilled and tightknit, and that we could not afford to have it broken up. In the long term, the interest which is shown in Rosyth may be a testimony to that sort of work, compared with the apparent indifference and almost reluctance of many of the contractors to grasp the nettle that is Devonport.
Will the Minister confirm that in an exchange with the hon. Member for Plymouth, Drake (Miss Fookes) he said that there was no likelihood of Devonport being broken up and sold off in sections? Will he explain the status of clause 1(2)(b), which states that that is possible. It refers to
the transfer of the whole or any part of the dockyard undertaking to that or another company with a view to that company providing any of the designated dockyard services at the dockyard under contract.
That clause gives a wholly different view from the impression that the Minister sought to convey to the hon. Lady. Our anxiety is not simply that Devonport could be sold off, but that it could be split into smithereens—a variety of companies and groupings—which could compound all the problems of security, transition and investment. That is a critical point on which the Minister will have to satisfy the House. He is taking powers in the Bill, but as is often the case with Government legislation that is ill-thought out and ill prepared, it may well be amended on the hoof in Committee. Will this be amendment No. 1? We are entitled to an answer, because, given the existence of that clause, the Minister has failed to allay the fears of hon. Members.
The Minister has even had difficulties convincing those who have constituency interests or some knowledge, understanding and respect for the work done in those yards. There has been extreme reluctance to support the Government. In many respects, we have seen displays of Conservative Back-Bench loyalty above and beyond the call of duty.
We are also worried about the guarantees that can be given in respect of the work in the dockyards. We have heard a great deal about the 70–30 split which the Minister hopes to introduce after about 18 months. But what is the 100 per cent. about which we are talking? Does it cover the 22 per cent. of naval refitting, including the Royal Fleet Auxilaries? If so, we are talking about a 70–30 split not of all the work available, but of about 78 per cent. of that work.
We must also take account of further slippage if we subtract the work done at Portsmouth. The hon. Member for Portsmouth, South (Mr. Hancock) would, if he were present, be concerned about the prospects for Portsmouth. Is Portsmouth to be set aside?
The potential figure of 54.5 per cent. of work being made available to the dockyards is the source of anxiety among dockyard workers about the prospects for further unemployment. They see the work being contracted out almost before their eyes, and the figures and quotations they have been given are not the ones that the Minister has at the back of his mind. We know that there are many problems associated with unprogrammed work. The Ministry has said that there will be alternative provision for emergency work in the future and that this would be made as and when required. Frankly, the very nature of unprogrammed work suggests national emergencies and raises questions of defence and security. This kind of ad hockery is just not good enough when the nation's security is at stake.
As well as finding a place for the work to be done, problems could also arise about who is to do it. Some of the British suppliers do not give cause for a great deal of confidence. Indeed, the Select Committee considered the record of organisations such as Plessey, which has been somewhat less than dependable in respect of the torpedo programme.

Mr. Sayeed: If there is an emergency, be it short or longer term, people can be pulled off mid-life ship refits and put on to emergency work, such as fitting a new weapon. Secondly, as the personnel will be privately organised, the opportunities for undertaking extra work and overtime will be enhanced. That would not be the case if they remained in the Civil Service.

Mr. O'Neill: As the potential enemy sails up the Channel, there will be the unedifying prospect of trade unions, contractors and the Government sitting round a table trying to work out the price for the job and transfers from one yard to another—the kind of thing that did not happen during the Falklands war because the morale and the commitment were there. I assure the House that in the future the morale and commitment will be there from the work force, but there is no guarantee that they will be there from the new contractual owners who could well see their prospects of profit slipping through their fingers. The flexibility that the hon. Gentleman mentioned becomes even more difficult when there are separate contracts for two yards.

Sir Antony Buck: rose—

Mr. O'Neill: I shall not give way, because I am just coming to the end. I am sorry, because I know that the hon. and learned Gentleman has been stopped before from intervening.
Separate contracts are a major problem. They are causing a great deal of anxiety. They will require far more than additional arrangements. They could create barriers between Rosyth and Devonport, the like of which have never existed before.
The prospects for the savings and changes in resources from tail to teeth and the like are far outweighed by the problems that we have identified. There are doubts about investment. As a country, we shall continue to own the assets, but the question of who will pay for the rental of new assets is vague. What will be the management's reward for its own investment? Will it be added to the profits? Will management be compensated? Such matters must be resolved. The Minister has not so far answered those points.
I suspect that if the Government, in their indecent haste to get the Bill on the statute book, tell us that the 19 committees will report within the next 10 days—by which time I imagine that the Bill will be in Committee—that might satisfy the House, but our experience of Civil Service committees suggests that it will take rather longer than 10 days to cover the points of anxiety which have been expressed by everyone here.
The Opposition are worried about national security and the working conditions and the rights of the work force. The Minister has to some extent given some guarantees about those matters, but we are not yet satisfied of one essential element of workers' rights—security of employment—because everything draws us to the conclusion that we shall see a deterioration in the working conditions and job security of people in areas of already high unemployment. That might be accepted in Harrow and the south-east, but in the south-west and the north such problems are far too apparent and real for us to accept the blandishments of a Minister of State in a hurry.
This enabling Bill is an unsatisfactory answer to what everyone regards as a problem. Everyone is now talking about solutions. There is a willingness on the part of trade unions and management and some sections of the Conservative party—certainly within the Select Committee on Defence—to participate in a consultative process, because everyone knows that the status quo is not an option. However, we are not prepared to accept the type of option offered by the Bill—an option which is a slap in the face for the work force and an insult to the management and which will endanger the country's security.

Mr. Norman Lamont: With the leave of the House, I should like to reply to the debate.
The rapture of some of my hon. Friends has been modified in their speeches on the Bill, but the most passionate speech against the Bill came from the right hon. Member for Blaenau Gwent (Mr. Foot). I nearly referred to him as the right hon. Member for Ebbw Vale and at times I even thought that he was still the hon. Member for Plymouth, Devonport campaigning against Randolph Churchill 40 years ago. He made practically the same speech as he might have made against any steel, colliery or hospital closure.
The right hon. Member for Blaenau Gwent took us back in history to the time of Henry VIII and John Hawkins, and said that Conservative Members were not interested in history. I should report for his benefit that Samuel Pepys, when Secretary of the Admiralty, had a rather different view of the royal dockyards from that of the right hon. Gentleman. In his diary, Samuel Pepys recorded sticking his fingers through new paint and finding rotten planks which had not been properly repaired. The right hon. Gentleman's recollection of history is selective and he does not address himself to the problems that exist in the dockyards today. He talked about the ideas incorporated in the Bill as though they were ideas from Mars—but anything to do with economics seems to strike the right hon. Gentleman as something from another planet.
The right hon. Member for Blaenau Gwent was certainly wrong when he quoted the Library reference sheet and disputed the fact, which I had made very clear in opening the debate, that on conditions of employment, redundancy, pay and leave, the Transfer of Undertakings (Protection of Employment) Regulations 1981 will apply, so employees can be satisfied on that point.
The right hon. Member for Llanelli (Mr. Davies) asked two questions about foreign ownership. He asked me about foreign ownership generally and I replied that tenders would be sought from British companies. He then asked what would happen if a company which had been awarded the contract came under foreign control or became subject to substantial foreign influence. In such conditions it would be written into the contract that the company would lose the contract to manage the yards.
The right hon. Member for Llanelli also asked for an assurance that the unallocated programme would be placed only with British companies. Provided that the work arises in the United Kingdom, that will happen. The right hon. Gentleman will appreciate, however, that sometimes the Navy needs emergency work almost anywhere in the world.

Mr. Denzil Davies: Will the Minister define "substantial" in relation to substantial holdings of shares in the parent company? Does that mean that the contract will be terminated and the Ministry of Defence will go through the whole tender process once more?

Mr. Lamont: The precise proportion of shareholding would have to be written into the contract. That has not been defined as such, but a company that entered into the undertaking would know exactly what it was embarking on, as would any company likely to develop a connection with that company.
The right hon. Member for Llanelli also asked about the core programme, and questioned whether it would be more or less than half the existing programme of the dockyards. I made it clear in my opening speech that the initial programme would be roughly the current level of Rosyth and Devonport combined. That would be the position at the beginning of the period of the contract.
The right hon. Gentleman then asked what proportion of the programme would be priced competitively. I could make the point that none of the work at present is priced competitively in the sense in which he asked the question. When we award a tender we shall certainly be looking for a commitment to risk pricing, quotations covering hourly rates and overhead recovery. From the very beginning there will be a strong element of competitive pricing.

Mr. Denzil Davies: It is a very simple question: What percentage of the total work carried on in the dockyard will be subject to the tender programme and subject to tender?

Mr. Lamont: The companies will tender for the contract and for the individual contracts within that contract. In assessing which company wins, we shall obviously look at the proportion. No proportion is laid down in advance. We shall look at the companies and decide which one gives the biggest element of price competition.
The hon. Member for Dunfermline, West (Mr. Douglas) referred to the quality of the work done at Rosyth on the deterrent and asked where we could find such work done better. We have no complaint about the quality of that work. I agree with the hon. Gentleman that the quality is extremely high, but that is not the only work carried out at Rosyth. The fact that work on the deterrent is done well does not mean that there is no argument for introducing commercial management for the other elements in the work of that yard and the opportunity for Rosyth to tender for other unallocated work. The threat to the deterrent from the Bill is certainly far less than the threat from Labour party policy.
As I have said, there is also the opportunity for extra work. With active commercial management and good corporate marketing, these companies will have the skill to build on the many centres of excellence in the two yards. There is the possibility of ship refitting and work on oil rig modules which the yards cannot go for at the moment. Both enterprises have the capacity and unrivalled skills to attract engineering work, including specialist skills and facilities for casting and machining, but they will obtain that extra work only if they are competitive. Several potential bidders have already begun to identify work of that nature which they believe could be secured for the two yards. In addition, the two yards will have the opportunity to bid for the unallocated defence programme; and, if they are competitive, they will secure a significant proportion of that work.
The right hon. Member for Plymouth, Devonport (Dr. Owen) said that it was absurd to separate capital investment decisions from the responsibility for running a facility, but what is proposed in the Bill is by no means unprecedented in the world. In quite a large number of defence facilities in the United States capital investment has been made by the Government.

Mr. Foot: Not in dockyards.

Mr. Lamont: Not in dockyards, but there are about 60 Government-owned contractor-operated plants covering the manufacture of aircraft, missiles, tanks, naval weapons, and so on, so the argument that capital investment and responsibility for running cannot be separated does not stand up. As my hon. Friend the Member for Tayside, North (Mr. Walker) has said, this may be the development of an idea, it may even be a new idea, but it is not necessarily to be condemned for that.
The right hon. Member for Devonport is sometimes so outspoken about privatisation that he is accused by his Liberal colleagues of being a closet Thatcherite. This measure brings the disciplines of the private sector and competition into the dockyards. I am surprised that the right hon. Gentleman does not apply to his own

constituency the philosophy that he so boldly expounds on other occasions. This measure will increase efficiency and competition.
The right hon. Member for Devonport was less than fair to my right hon. Friend the Secretary of State when he said that the redundancies at Devonport and Rosyth had been created at the fiat of the Secretary of State. Those redundancies were necessary if the dockyards are to become efficient. The Public Accounts Committee, which has been critical of the Government's actions, has criticised the efficiency measures that have been taken at Devonport and Rosyth. It claims that they are not what is required. The right hon. Member for Devonport, for all his alleged toughness and tenderness combined, is not facing the issue. Many people have criticised these yards. There is a need for them to become efficient.
The main criticism which has been made in the debate is that, in some sense, the Government's proposition is not proven and does not guarantee results. That was the view put forward by the right hon. Member for Devonport, and that was why he advanced the idea of a trading fund. The trading fund concept does not address the problem in its totality. It does not bring about a sufficient separation of the customer and the supplier, it does not provide the spur of competition, and it does not create conditions in which the contractor is anxious to get his contract renewed.
I was interested that the hon. Member for Clackmannan (Mr. O'Neill) should describe the scheme as a form of reselection. That is a word that looms large in the minds of Opposition Members. The hon. Member for Dunfermline, East (Mr. Brown) said that there had been far too cosy a relationship between the yards and the Ministry of Defence. That is precisely right. That is why a trading fund is not the right solution. We need to separate the customer and the supplier.
If the right hon. Member for Devonport thought that the trading fund solution was the answer to the problem of the dockyards, he could have introduced a trading fund when he was the Minister with responsibility for the Navy. He could have introduced such a fund in 1978 when he was a member of the Labour Government that examined the proposition and decided to do nothing.

Dr. Owen: The Minister comes fairly new to the Department. When I was Minister with responsibility for the Navy, I introduced Leslie Norfolk from ICI and set up the Mallabar committee, which recommended a trading fund. I have fought three elections at Devonport on the basis of supporting a trading fund.

Mr. Lamont: The right hon. Member for Devonport may have done some good things, but he did not go far enough earlier and he does not go far enough now.
It has been accepted for many years that a change in the yards is necessary. The PAC in its report pointed out that between 1971 and 1982 there were five major reports, all of which were critical of the performance of the dockyards. In its latest report the PAC referred to changes having
little resulting real progress or effective action; we also considered the effect of current weaknesses in Dockyard performance and management.
The fourth report of the Select Committee, which has been critical of what the Government are doing, acknowledged that there was no support for an unreformed status quo. Everyone agrees that change is necessary. The only reason why Labour Members have become overnight converts to


change of some kind is that they want any change other than change by a Government who recognise the problem and are determined to tackle it.
The reason for putting forward these proposals is to increase efficiency and effectiveness, not to reduce the number of civil servants. The motive is to get value for money. The Opposition seem to think that there is something wrong in trying to get value for money within the defence budget. As my hon. Friend the Member for Northampton, North (Mr. Marlow) said, it is all very well to talk about the effectiveness of our fighting force, but that force does not exist in a world where there are no limits on the defence budget.
If we manage by these proposals to save £30 million a year, over four years that will mean another frigate for the Royal Navy or another six or seven Tornadoes. If the right hon. Member for Blaenau Gwent does not like the thought of military equipment, he should consider that that saving could mean six 300-bed hospitals. Is anyone saying that that sort of saving is not worth working for and achieving?
The right hon. Member for Devonport and my hon. Friends the Members for Drake and for Cornwall, South-East (Mr. Hicks) referred to the insecurity that the labour force will feel if its members are put into a management company which might in turn change in another seven years. I understand those fears, but I hope that the right hon. Gentleman and my hon. Friends will not exaggerate or lend unjustified credence to them. As I said when opening the debate, pay, conditions of service and pensions will be unaffected by the transfer. The core programme of work will remain, and that will be equal to the existing work programme at both Devonport and Rosyth. In addition, there will be the opportunity to tender for the unallocated proportion of the work.
The right hon. Member for Devonport advanced a curious argument when he said that if the ownership of the operating company changed in seven years, the employees of that company would have no guarantee of employment. As I have said, the core programme will continue. There will continue to be a need for naval refits and naval dockyards. If the ownership of the management company changes while the assets remain in the Government's hands, that will not alter the need for continuing refits and a continuing programme for the Royal Navy.
There has been criticism by the Pubic Accounts Committee and the Select Committee on Defence of the figures that the Government have produced for the savings that might result from introducing the dockyards to private management. When the Government last gave evidence to the Committee, they made it clear that the savings might be over £30 million, or 7.5 per cent. of turnover. Surely that would be a worthwhile saving. However, these are merely illustrative figures. No one would ever claim that such figures are anything but illustrations. Much depends on productivity improvements and the enterprise that is brought to the dockyards by outside management.
We are confident that private management of the dockyards will result in greater efficiency and productivity increases. Such developments are bound to result in more savings than if the dockyards continue to be operated by civil servants within a Government Department.
We have heard much talk from Labour Members about the effectiveness of our forces. I find that a bit rich from a party which is dedicated and committed to cutting defence spending. I find it a bit rich from a party which, when in office, cut defence spending to the lowest level

in real terms since the end of the Korean war. Above all, it is utterly hypocritical that there should be so much said, as my hon. Friend the Member for Tayside, North observed, about unemployment at Rosyth. Work on the independent deterrent accounts for more than 50 per cent. of turnover at Rosyth. If the Labour party's policy is implemented, it will result in hardly anything being left there. Labour Members weep crocodile tears over non-existent dole queues at Rosyth while adhering to the policy of abandoning our independent deterrent, which would have a catastrophic effect on Rosyth.
The proposals in the Bill are designed to achieve better value for money. They will increase the effectiveness of our forces and improve our defences. Those ideas are not of interest to the Labour party, but they have been backed by the Navy as well as by Ministers. For that reason, the Bill deserves the support of the House.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 257, Noes 171.

Division No. 14]
[10 pm


AYES


Adley, Robert
Clark, Sir W. (Croydon S)


Aitken, Jonathan
Clarke, Rt Hon K. (Rushcliffe)


Alexander, Richard
Clegg, Sir Walter


Alison, Rt Hon Michael
Cockeram, Eric


Amess, David
Colvin, Michael


Arnold, Tom
Conway, Derek


Ashby, David
Coombs, Simon


Aspinwall, Jack
Cope, John


Atkins, Robert (South Ribble)
Cormack, Patrick


Baker, Rt Hon K. (Mole Vall'y)
Couchman, James


Baker, Nicholas (Dorset N)
Cranborne, Viscount


Banks, Robert (Harrogate)
Critchley, Julian


Batiste, Spencer
Crouch, David


Beaumont-Dark, Anthony
Currie, Mrs Edwina


Bellingham, Henry
Dickens, Geoffrey


Bendall, Vivian
Dicks, Terry


Benyon, William
Dorrell, Stephen


Bevan, David Gilroy
Douglas-Hamilton, Lord J.


Biffen, Rt Hon John
Dover, Den


Biggs-Davison, Sir John
du Cann, Rt Hon Sir Edward


Blackburn, John
Dunn, Robert


Body, Richard
Dykes, Hugh


Boscawen, Hon Robert
Edwards, Rt Hon N. (P'broke)


Bottomley, Peter
Eggar, Tim


Bottomley, Mrs Virginia
Evennett, David


Bowden, A. (Brighton K'to'n)
Eyre, Sir Reginald


Bowden, Gerald (Dulwich)
Fairbairn, Nicholas


Boyson, Dr Rhodes
Fallon, Michael


Braine, Rt Hon Sir Bernard
Farr, Sir John


Brandon-Bravo, Martin
Fenner, Mrs Peggy


Bright, Graham
Fletcher, Alexander


Brinton, Tim
Forman, Nigel


Brittan, Rt Hon Leon
Franks, Cecil


Brooke, Hon Peter
Garel-Jones, Tristan


Brown, M. (Brigg &amp; Cl'thpes)
Glyn, Dr Alan


Browne, John
Goodhart, Sir Philip


Bruinvels, Peter
Goodlad, Alastair


Bryan, Sir Paul
Gower, Sir Raymond


Buchanan-Smith, Rt Hon A.
Grant, Sir Anthony


Buck, Sir Antony
Gregory, Conal


Budgen, Nick
Griffiths, Sir Eldon


Bulmer, Esmond
Grist, Ian


Burt, Alistair
Grylls, Michael


Butcher, John
Gummer, Rt Hon John S


Butler, Rt Hon Adam
Hamilton, Hon A. (Epsom)


Carlisle, Kenneth (Lincoln)
Hampson, Dr Keith


Carlisle, Rt Hon M. (W'ton S)
Hanley, Jeremy


Carttiss, Michael
Hawksley, Warren


Cash, William
Hayward, Robert


Chapman, Sydney
Heathcoat-Amory, David


Churchill, W. S.
Heddle, John


Clark, Dr Michael (Rochford)
Henderson, Barry






Holland, Sir Philip (Gedling)
Ridley, Rt Hon Nicholas


Holt, Richard
Ridsdale, Sir Julian


Hordern, Sir Peter
Rifkind, Malcolm


Howard, Michael
Rippon, Rt Hon Geoffrey


Howell, Rt Hon D. (G'ldford)
Roberts, Wyn (Conwy)


Howell, Ralph (Norfolk, N)
Robinson, Mark (N'port W)


Irving, Charles
Roe, Mrs Marion


Kershaw, Sir Anthony
Rossi, Sir Hugh


Knowles, Michael
Rowe, Andrew


Lamont, Norman
Rumbold, Mrs Angela


Lang, Ian
Sackville, Hon Thomas


Lawrence, Ivan
Sainsbury, Hon Timothy


Leigh, Edward (Gainsbor'gh)
St. John-Stevas, Rt Hon N.


Lennox-Boyd, Hon Mark
Sayeed, Jonathan


Lester, Jim
Shaw, Giles (Pudsey)


Lewis, Sir Kenneth (Stamf'd)
Shaw, Sir Michael (Scarb')


Lightbown, David
Shelton, William (Streatham)


Lilley, Peter
Shepherd, Colin (Hereford)


Lloyd, Ian (Havant)
Shepherd, Richard (Aldridge)


Lloyd, Peter, (Fareham)
Silvester, Fred


Lyell, Nicholas
Sims, Roger


McCrindle, Robert
Skeet, T. H. H.


Macfarlane, Neil
Smith, Tim (Beaconsfield)


MacKay, Andrew (Berkshire)
Spence, John


MacKay, John (Argyll &amp; Bute)
Spencer, Derek


Maclean, David John
Spicer, Jim (Dorset W)


McNair-Wilson, M. (N'bury)
Squire, Robin


McQuarrie, Albert
Stanbrook, Ivor


Madel, David
Stanley, John


Major, John
Steen, Anthony


Malins, Humfrey
Stevens, Lewis (Nuneaton)


Malone, Gerald
Stevens, Martin (Fulham)


Maples, John
Stewart, Andrew (Sherwood)


Marland, Paul
Stokes, John


Marlow, Antony
Stradling Thomas, Sir John


Marshall, Michael (Arundel)
Sumberg, David


Mates, Michael
Taylor, John (Solihull)


Mather, Carol
Taylor, Teddy (S'end E)


Maude, Hon Francis
Temple-Morris, Peter


Maynard, Miss Joan
Terlezki, Stefan


Mellor, David
Thomas, Rt Hon Peter


Merchant, Piers
Thompson, Donald (Calder V)


Meyer, Sir Anthony
Thompson, Patrick (N'ich N)


Miller, Hal (B'grove)
Thornton, Malcolm


Mills, Iain (Meriden)
Townend, John (Bridlington)


Miscampbell, Norman
Townsend, Cyril D. (B'heath)


Moate, Roger
Tracey, Richard


Montgomery, Sir Fergus
Trippier, David


Morris, M. (N'hampton, S)
Trotter, Neville


Morrison, Hon C. (Devizes)
Twinn, Dr Ian


Morrison, Hon P. (Chester)
van Straubenzee, Sir W.


Moynihan, Hon C.
Viggers, Peter


Mudd, David
Waddington, David


Neale, Gerrard
Walden, George


Newton, Tony
Walker, Bill (T'side N)


Nicholls, Patrick
Walker, Rt Hon P. (W'cester)


Norris, Steven
Wall, Sir Patrick


Onslow, Cranley
Waller, Gary


Oppenheim, Phillip
Wardle, C. (Bexhill)


Oppenheim, Rt Hon Mrs S.
Warren, Kenneth


Ottaway, Richard
Watson, John


Page, Sir John (Harrow W)
Watts, John


Parkinson, Rt Hon Cecil
Wells, Bowen (Hertford)


Parris, Matthew
Wells, Sir John (Maidstone)


Patten, Christopher (Bath)
Wheeler, John


Pattie, Geoffrey
Whitfield, John


Pawsey, James
Whitney, Raymond


Percival, Rt Hon Sir Ian
Wiggin, Jerry


Pollock, Alexander
Winterton, Nicholas


Portillo, Michael
Wolfson, Mark


Powell, William (Corby)
Wood, Timothy


Powley, John
Woodcock, Michael


Prentice, Rt Hon Reg
Young, Sir George (Acton)


Price, Sir David
Younger, Rt Hon George


Raffan, Keith



Rathbone, Tim
Tellers for the Ayes:


Renton, Tim
Mr. Michael Neubert and


Rhodes James, Robert
Mr. Tony Durant.


Rhys Williams, Sir Brandon






NOES


Adams, Allen (Paisley N)
Home Robertson, John


Alton, David
Howells, Geraint


Anderson, Donald
Hoyle, Douglas


Archer, Rt Hon Peter
Hughes, Robert (Aberdeen N)


Ashton, Joe
Hughes, Roy (Newport East)


Atkinson, N. (Tottenham)
Hughes, Sean (Knowsley S)


Bagier, Gordon A. T.
Hughes, Simon (Southwark)


Banks, Tony (Newham NW)
Janner, Hon Greville


Barnett, Guy
John, Brynmor


Beckett, Mrs Margaret
Jones, Barry (Alyn &amp; Deeside)


Benn, Rt Hon Tony
Kaufman, Rt Hon Gerald


Bennett, A. (Dent'n &amp; Red'sh)
Kennedy, Charles


Bermingham, Gerald
Kilroy-Silk, Robert


Bidwell, Sydney
Kinnock, Rt Hon Neil


Boyes, Roland
Lambie, David


Bray, Dr Jeremy
Lamond, James


Brown, Gordon (D'f'mline E)
Leighton, Ronald


Brown, N. (N'c'tle-u-Tyne E)
Lewis, Ron (Carlisle)


Brown, Ron (E'burgh, Leith)
Lewis, Terence (Worsley)


Bruce, Malcolm
Litherland, Robert


Buchan, Norman
Livsey, Richard


Caborn, Richard
Lloyd, Tony (Stretford)


Callaghan, Rt Hon J.
Lofthouse, Geoffrey


Callaghan, Jim (Heyw'd &amp; M)
Loyden, Edward


Campbell, Ian
McCartney, Hugh


Campbell-Savours, Dale
McDonald, Dr Oonagh


Canavan, Dennis
McKay, Allen (Penistone)


Carter-Jones, Lewis
McKelvey, William


Cartwright, John
MacKenzie, Rt Hon Gregor


Clark, Dr David (S Shields)
Maclennan, Robert


Clarke, Thomas
McNamara, Kevin


Clay, Robert
McTaggart, Robert


Clwyd, Mrs Ann
McWilliam, John


Cocks, Rt Hon M. (Bristol S.)
Madden, Max


Cohen, Harry
Marek, Dr John


Cook, Frank (Stockton North)
Marshall, David (Shettleston)


Cook, Robin F. (Livingston)
Martin, Michael


Corbett, Robin
Mason, Rt Hon Roy


Corbyn, Jeremy
Maxton, John


Cunliffe, Lawrence
Maynard, Miss Joan


Cunningham, Dr John
Meacher, Michael


Davies, Rt Hon Denzil (L'lli)
Meadowcroft, Michael


Davis, Terry (B'ham, H'ge H'l)
Michie, William


Deakins, Eric
Mikardo, Ian


Dewar, Donald
Mitchell, Austin (G't Grimsby)


Dormand, Jack
Morris, Rt Hon A. (W'shawe)


Douglas, Dick
Morris, Rt Hon J. (Aberavon)


Duffy, A. E. P.
Nellist, David


Eadie, Alex
Oakes, Rt Hon Gordon


Eastham, Ken
O'Brien, William


Ewing, Harry
O'Neill, Martin


Fatchett, Derek
Owen, Rt Hon Dr David


Field, Frank (Birkenhead)
Park, George


Fields, T. (L'pool Broad Gn)
Patchett, Terry


Flannery, Martin
Pavitt, Laurie


Foot, Rt Hon Michael
Penhaligon, David


Forrester, John
Pike, Peter


Foster, Derek
Powell, Raymond (Ogmore)


Foulkes, George
Radice, Giles


Fraser, J. (Norwood)
Randall, Stuart


Freud, Clement
Rees, Rt Hon M. (Leeds S)


George, Bruce
Richardson, Ms Jo


Gilbert, Rt Hon Dr John
Roberts, Ernest (Hackney N)


Godman, Dr Norman
Robertson, George


Golding, John
Robinson, G. (Coventry NW)


Gould, Bryan
Rogers, Allan


Gourlay, Harry
Rooker, J. W.


Hamilton, James (M'well N)
Rowlands, Ted


Hamilton, W. W. (Fife Central)
Sedgemore, Brian


Hancock, Mr. Michael
Sheerman, Barry


Harman, Ms Harriet
Sheldon, Rt Hon R.


Harrison, Rt Hon Walter
Shore, Rt Hon Peter


Hart, Rt Hon Dame Judith
Short, Mrs ft.(W'hampt'n NE)


Hattersley, Rt Hon Roy
Skinner, Dennis


Haynes, Frank
Smith, C.(Isl'ton S &amp; F'bury)


Heffer, Eric S.
Snape, Peter


Hicks, Robert
Soley, Clive


Hogg, N. (C'nauld &amp; Kilsyth)
Spearing, Nigel


Holland, Stuart (Vauxhall)
Stewart, Rt Hon D. (W Isles)






Stott, Roger
Williams, Rt Hon A.


Thomas, Dafydd (Merioneth)
Wilson, Gordon


Tinn, James
Winnick, David


Torney, Tom
Young, David (Bolton SE)


Wainwright, R.



Wallace, James
Tellers for the NOES


Wardell, Gareth (Gower)
Mr. Mark Fisher and


Weetch, Ken
Mr. Ron Davies.


White, James

Question accordingly agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 42 (Committal of Bills).

Orders of the Day — DOCKYARD SERVICES BILL [MONEY]:

Queen's recommendation having been signified—

Resolved,
That, for the purposes of any Act resulting from the Dockyards Services Bill, it is expedient to authorise the payment out of money provided by Parliament of any expenses of the Secretary of State—

(a) incurred in connection with the formation or operation of any company formed with a view to, or for any purpose of, the provision of dockyard services at Her Majesty's dockyards; or
(b) incurred in assuming responsibility for any liabilities of any company which is or has been concerned in or in connection with the provision of such services. [Mr. Peter Lloyd.]

Sugar and Starch

Mr. Speaker: I have selected the amendment in the names of the hon. Member for Greenock and Port Glasgow (Dr. Godman) and his hon. Friends.
I understand that no fewer than 14 right hon. and hon. Members wish to take part in this one and a half hour debate, so I hope that speeches will be brief.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John Gummer): I shall seek immediately to obey your request, Mr. Speaker. I beg to move,
That this House takes note of European Community Documents Nos. 8687/85, 9178/85 and 8781/85, relating to the sugar sector and 11172/84 and 8688/85, relating to the reform of the starch regime, and supports the Government's objectives to secure satisfactory agreements on them which take account of the interests of both producers and users of the products concerned.
The core of the motion is the responsibility which Britain felt that it had, and which the House insisted we had, towards the African, Caribbean and Pacific countries, and the continuation of cane sugar refining in Britain. It is important, and hon. Members on both sides of the House should remark upon it, to underline the generous way in which the Community, at Britain's behest, has sought to accommodate, at a price well above the world price, sugar coming from countries for which this product and this particular crop is of such great importance.
Of course, it is always possible to insist that we could have done more and better, but there are occasions when it is worth while saying how well we have done, and it is right and proper that we should, for those countries need the markets which we can give them, and it is a market and a responsibility which we shall continue to support.
The proposition is that we should continue the system which was perhaps best expressed in 1981 in the letter which was written on behalf of the Community to say that we should try to get a parallelism—[Interruption.] I am sorry, but that is the only word that I know which covers the matter—between, on the one hand, the price paid for raw sugar in the ACP countries, and on the other for the raw sugar produced by beet producers in the Community.
The second parallelism is between the margins which are provided for the sugar manufacturers in Britain and the rest of the Community and the margins provided for the sugar cane refiners.
There are those who suggested that we should have agreed with those who wanted us to narrow the margins which are provided for the cane refiners in order to increase the money that was going direct to the producers of cane sugar. That would have been a great mistake. We opposed that, and we did so for two reasons. First, if we are to defend the generosity of the Community in allowing the sugar into Britain and elsewhere—

Sir William Clark: My right hon. Friend is talking about the generosity of the Community. One of the cardinal points at issue when we joined the Common Market was that there should be a guarantee for the ACP countries of some 1.2 million tonnes of sugar.

Mr. Gummer: It was 1.4 million tonnes, of which 1.3 million tonnes was taken up by those to whom it was offered.
I used the word "generosity" in the proper sense, which is that that in no way detracts from the assurance. It is generosity by the whole Community, including ourselves, to continue to pay a price to people outside the Community which is well above the price on the world market. I happen to think that that is generosity. It is an absolute commitment, and I would not in any sense derogate from that commitment. I hope that my hon. Friend will accept that. No other part of the world does that, and in that sense it is generosity.

Mr. Teddy Taylor: rose—

Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. Will the Minister address the House and not turn his back on the Chair. Let me remind those hon. Members who are trying to intervene and catch my eye that a great number of hon. Members wish to speak.

Mr. Gummer: I repeat that I believe it to be generous. It is both a responsibility and a generous commitment, of which we should be proud, and which we should continue. It is important to defend that generosity. The only way to do so is to provide a reasonable basis. That basis is provided by the 1981 letter. It ensures that we should provide, for those who come from the ACP countries, a parallelism which is defensible and which ought to be defended. That is why we did not support the Commission's suggestion that we should narrow the margins that were provided for the cane refiners.
I hope, Mr. Deputy Speaker, that you will allow me to say that it is important that the margins provided for the cane refiners should be kept at a reasonable level, otherwise the ACP countries will be unable to export their sugar to the Community. There will be insufficient refining capacity. The defence of that refining capacity is an essential part of any sensible policy that allows ACP sugar into the Community. We are pledged to defend that policy.
Secondly, the documents deal with the problem of the reduced price quota sugar for the chemical industry. This is a matter of considerable concern, both to this country and to the Community as a whole. There is no earthly point in using this as a means to encourage the production of yet more sugar. We need to use it as a means to sell the sugar that we already produce. That is why we were so strongly opposed last year to the Commission's proposals. They would have had the effect of increasing the amount of C, or non-quota, sugar, and it was thought that they would provide the basis for selling cheaper sugar to the chemical industry.

Mr. Chris Smith: rose—

Mr. Gummer: It would be much better if I allowed as many right hon. and hon. Members as possible to speak, rather than allow the hon. Gentleman to intervene. That is not the real reason. The real reason is that I am more frightened of Mr. Deputy Speaker than I am of the hon. Gentleman.
For the reason that I have given, we shall resist the Commission's original proposals. We are seeking to improve the position. We welcome in principle this proposal by the Commission. It will provide an opportunity to encourage new markets for the sugar that we produce both in this country and in the rest of the Community. It will not provide, as the previous proposals did, a means of expanding non-quota sugar.
There is a problem about starch. The industries which use starch are helped in two ways. Protection is given to Community-produced products which use starch. Support is also given to the starch manufacturers. The Commission's aim is to ensure that both means of support are not provided. There is no proper answer yet to this problem. We are not happy about the proposals that have been placed before us. We are determined to protect the British food industry from what would otherwise be far too sharp an attack on the pricing structure and on the cost of the industry's products.
It is unacceptable to help people twice—by protection and by direct support. It is also unacceptable to change the system and thereby upset the market position as to make it impossible for those who rely upon it to put their house in order. For that reason, we have sought to change the Commission's proposals. Both we and the other member states have already secured important improvements. They were incorporated in the Commission's revised proposals, which were published in the summer of this year.
We are discussing a number of matters that are of great importance. The kernel of the issue is the question of quotas for each country. Many people have made a strong case that the current position is unsatisfactory. Many hon. Members, on both sides of the House, have put that case, especially those who, like myself, represent constituencies that produce beet sugar.
The discussions in Brussels are aimed at finding a way to meet two points: first, the continuing over-production of sugar; and, secondly, the sense of dissatisfaction felt in this and other countries about the way in which the quotas have been parcelled. I cannot believe that, in advance of those discussions, the House would expect me to predict which way they will go. Whichever way, it is necessary that the United Kingdom provides a continuing secure market for ACP cane sugar—provided that the price remains competitive with Community beet sugar. That must be basic to any decisions.
I do not believe that those who seek an improved quota for British beet sugar would want it to be at the cost of the ACP support that we have given—[HON. MEMBERS: "Why not?"] Because we have a clear commitment, both moral and historical, to support that. I repeat that commitment tonight. However, at the same time it is right that the Government should put clearly the strong belief of the beet industry that the B quota, which was set up at the time of the arrangements in 1981, is not a fair reflection of our historic production. Indeed, it does not meet the problem that will arise if we expect an expansion in demand for sugar in the chemical industry—nor the circumstances that have already arisen, where the margin between what we produce and what we need as a nation is so narrow.
I hope that those who have been heartened by my clear promise on the ACP will also agree that it is reasonable for the Government to seek ways to improve the position for our beet producers, who feel that they have not been fairly treated—

Several Hon. Members: rose—

Mr. Gummer: It would be wrong of me to give way to my hon. Friends, having refused to give way to Opposition Members. I must adhere to what you requested, Mr. Deputy Speaker, and speak briefly now and

then reply to the points raised in the debate. When the amendment is moved the House will no doubt wish to comment upon it. When I have listened to the case for the amendment, I can make my recommendations on what the House should do. It would be original and unusual if I were not prepared to listen to the speeches in favour of the amendment. [Interruption.] Indeed, if I said that I would not listen to them, the laughter of hon. Members would be even greater than it is now.

Sir John Wells: On a point of order, Mr. Deputy Speaker. Is it not intolerable that my right hon. Friend should waffle on with this sort of badinage, when we all want to contribute—

Mr. Deputy Speaker: Order. The hon. Gentleman knows that that is not a point of order.

Mr. Brynmor John: I want first to deal with the document on the starch regime, which removes its subsidies for starch in food use and transfers them to starch in industrial use, and at prevailing world prices.
Those who advocate the use in Industry of beet sugar will know that the chemical industry sees a future for the increased use of sugar, as it sees an increase in the use of starch, only at world prices. I welcome that development because it will help not only the existing industry but the new biotechnological industries, and there is evidence that the availablility of world prices in countries outside the EEC has helped to site the new industries in places such as Austria.
I accept the Minister's remarks about Britain having a special problem in the sense that we have a dependence greater than the rest of the EEC on starch in foodstuffs and that there are commodities such as soups and sauces which do not have the benefit of an import levy. I urge the Minister in any negotiations to bear in mind that some commodities do not have that double protection, so that the rationale for the removal of the subsidy from foodstuffs is not borne out.
The main problem that interests the House tonight surrounds the three documents that deal with the sugar regime, which is in surplus and, as intended, is not self-supporting. It is extremely disappointing to note that the EEC has again ducked its responsibilities by proposing that quotas should remain the same in total. As introduced, those quotas were, as I think the Minister recognised, inequitable and almost capricious in the sense, to give one example, that they gave Belgium and Luxembourg production quotas which were two and a half times their comsumption.
But, if it has been bad in its internal effect in the EEC, the regime's external effect has been devastating. The outcome of the quotas means that in 1984–85 the EEC produced 3 million tonnes above the amount consumed, and that is the reality of the quotas now recommended for continuance.
We dump sugar from the EEC on the world market. The most efficient world producer can produce at only 12 cents a pound, but the spot price in New York for most of this year has hovered between 3 and 4 cents a pound. For many primary producers of which we speak tonight, that spells poverty.

Mr. Alfred Morris: His Excellency the High Commissioner for Guyana, who is


chairman of the ACP High Commissioners' Sugar Committee, has spoken of grave concern if there should be any increase in the United Kingdom sugar beet quota. There is no doubt that such an increase would conflict with the guarantees. We are talking about extremely poor countries. Does my hon. Friend agree that Her Majesty's Government should give a plain and definite commitment tonight to the ACP suppliers on this important subject?

Mr. John: Later in my remarks I shall be asking for such a guarantee. I have been speaking of total production, and the over-supply is, I gather to be continued for two reasons.
The first is that the Commission asserts that enlargement of the EEC will
cause the surpluses to fall heavily.
Its own assessment of the situation shows how much those words are exaggerated, for the fall will apparently be about 250,000 tonnes out of a surplus of 3 million tonnes, so that 91.5 per cent. of the existing surplus will remain in surplus even after enlargement of the Community.
Secondly, the plea is made that there will be further consumption of sugar in the chemical and biotechnological industries. I hope that that occurs and that the United Kingdom gets its fair share of development and innovation. But how much additional production and consumption will that mean? The estimates vary from 80,000 tonnes in the EEC today to about 500,000 tonnes in 1992; and by then, it is estimated by the Chemical Industries Association, Britain might be using 150,000 tonnes. But those estimates depend upon one factor, which I have double-checked with the association: that sugar is available at the world price. That means, on all the figures that we have, that it is charged at a quarter of the present price, with a 75 per cent. subsidy—double what is now being offered. The gap must force a downward revision of those forecasts of consumption. Indeed, the Chemical Industries Association says that, if the price remains as it is, there will be no extra consumption of sugar in those industries. At the moment, the United Kingdom is already producing a surplus of 200,000 tonnes, so that in 1985 we grow more than we estimate that the chemical industries could possibly need as a maximum in 1992.
Like many other hon. Members, I have been lobbied, fairly but firmly, by the British Sugar Corporation about an increase in the beet sugar quota to meet the expanded demand. If I were satisfied about the justification of it by statistics and assured that it would not go indirectly into the food industry, thereby destroying hundreds of jobs in the Westburn refinery of Tate and Lyle in Scotland, I might find the argument persuasive. But on the arguments I have given, I cannot see—[Interruption.] Hon. Gentlemen talk about British sugar. We once talked about British steel, on which they were nothing like as protective.

Mr. Michael Brown: rose—

Mr. John: No, I am talking about

Mr. Brown: rose
—

Mr. Deputy Speaker: Order. The hon. Member is not giving way.

Mr. John: I care deeply about sugar. I care about it deeply enough not to tell people and producers in this country fairy tales by pretending that there will be a lot of

consumption which I do not believe to be merited on the facts. I believe that the existing production will cover any reasonably sane estimate of the extra consumption in the chemical industries and the various other technological industries.
All efforts should be geared to bringing sugar production in the EEC under control. As the Commission has evaded the problem, it can only add to its unenviable reputation for procrastination. The regime is not self-financing. In 1985 it cost us £385 million on the CAP budget, and as consumers it cost us a great deal more.
Document 8687/85 tries to cure the problem by proposing a levy. Is that in fact so? In last Friday's Financial Times and this week's Agra Europe, one reads that a much more timid and therefore much more popular—in Europe—set of levy proposals now exists. If that is true, how can we be expected to take note of the document, except possibly as a historical curiosity? I believe that the weakening of the proposal will lead to a further charge on the CAP. Have the Government estimated how much that will be?
I did not seek to amend the motion, because I regard our pledges to the ACP countries of 1.3 million tonnes of cane sugar as absolutely and firmly binding. I hope that the Government have the same feeling about it. I notice that the Minister assents. If that is so, it is a shame that it was not put in the motion. But a ministerial assurance will suit me, and I hope that the right hon. Gentleman will repeat it.
In this case, as with so many agricultural matters, the problem is that many people see the parts without the whole. Although we note the documents tonight, we must regret that an overall view is as far removed from the Commission as it ever was.

Mr. Geoffrey Rippon: I welcome the Minister's comment about the firm commitment to the Commonwealth sugar producers. Many of us are deeply concerned that the commitment should be honoured. It may be wrong to talk of us continuing to behave generously, but that is true, at least in the sense that there is no doubt that the Commonwealth sugar producers have benefited considerably, as the Minister said, in a difficult world market, from the undertaking that we and the Community gave when Britain became a full member.
We gave the clearest possible assurances at the Lancaster house conference of a secure and continuing market of comparable quantities to that which the United Kingdom and the Community had entered under the Commonwealth Sugar Agreement. We also said that we would give fair prices. At the conference we were asked for and gave what were described as "bankable assurances"—that we would accept the Commonwealth sugar in comparable quantities at remunerative prices. That is the justification for paying the Commonwealth sugar producers the appropriate price.
There is much discussion in the House about the need to aid the developing world and how we must help it through its debt crisis. The best way for us to help is by paying developing countries a fair price for what they produce. That is a specific and moral commitment, and I am sure that no hon. Member would want to withdraw from that.
Furthermore, at the Lancaster house conference I said:


If quotas for beet sugar production were increased in such a way that imports from Commonwealth countries were threatened, it would be a breach of the undertaking by the Community.
What we wanted tonight, and what I think my right hon.
Friend has given, is an unequivocal assurance that the undertakings given in 1971, and subsequently, are being honoured by the British Government.
The Commission found that the world market was in a serious state and that future prospects were bleak. For that reason it said that it was right that the existing quotas should not be increased. The Commonwealth sugar producers are concerned about what is happening in the United Kingdom because our consumption of their cane sugar has fallen rapidly: at one time it was two thirds, but it is now clown to 50 per cent. Against that background, it is difficult to argue for an increase in sugar beet quotas, especially when we have overproduction, not only in the Community but in the United Kingdom. Even if an additional demand from the chemical industries is expected, that does not justify any increase in sugar beet quotas at present.
People have talked about the loss of jobs, and there is a real fear that the closure of Tate and Lyle's refinery in Liverpool might be followed by a closure in Greenock, Scotland. That might result in a loss of some 400 jobs. There are job losses to be faced in any circumstances, but the House must bear it in mind that we have an honourable record of keeping our treaty commitments, and there was a clear treaty commitment. I remind the House that it was demanded from the British Government by both sides of the House when we entered the Community.
I understand that there is a dispute about the level of the ACP guaranteed prices. The initial offer was for a 1·15 per cent. increase for raw sugar compared with 1·3 per cent. for white sugar. The Commission document, issued on 11 September, said:
the Commission proposes that the Council should alter the intervention price for raw sugar so that it is increased by the same percentage as that for white sugar, that is, by 1·3 per cent., and that it should be set at 44·92 ecu per 100 kg with effect from 1 July 1985.
I hope that the Government now accept that. I have had a look at the explanatory memorandum submitted by my right hon. Friend the Minister to the House on 4 October
1985, which says:
The proposal retrospectively to increase the raw sugar intervention price would mean that the refining margin would increase by only 1·.8 per cent. while that for beet processors would remain at 3·.5 per cent. The Government therefore opposes this proposal which would discriminate against cane refiners.
I should like it to be made clear that the Government are opposed to any discrimination against cane refiners in respect of those prices. It may be a small amount money, but it is a principle to which the Commonwealth sugar producers rightly attach importance. Perhaps my right hon. Friend will clear that up.

Dr. Norman A. Godman: I beg to move at the end of the Question, to add:
and fulfil the objectives set out in the Resolution of the House relating to sugar supplies of 11th November 1974.
The amendment is in my name and those of my hon.
Friends the Members for Newham, South (Mr. Spearing) and for Newham, North-East (Mr. Leighton).
I remind the House of what the resolution referred to in the amendment said 11 years ago:

That this House takes note of Commission Document No. R/1900/73, but declines to approve Commission Document R1957/74 as it makes no provision either for continuing imports, at fair and stable prices, of at least 1·.4 million tons of cane sugar from Commonwealth countries, or for the continued existence of and employment in the port sugar refining industry in the United Kingdom, or for securing long term supplies of domestically refined cane sugar at a fair price to consumer and producer."—[Official Report, 11 November 1974; Vol. 881, c. 202.]
The calling of this Back-Bench amendment is very important. Take-note motions are of major importance, as my hon. Friend the Member for Newham, South said to the House in the debate on sugar supplies on 11 November
1974. Therefore, I am most grateful to Mr. Speaker for his recognition of the need to debate the amendment. I remind the House that it refers specifically to a resolution of the House of Commons. The Government's objectives must surely accord with those contained in the resolution. To accept the amendment would be to continue with the resolution.
The motion proposed by the Minister, despite what he said, is a little ambiguous. If hon. Members will allow the lack of modesty, the amendment removes that ambiguity. At the same time, it diminishes the fears felt by many people employed in the United Kingdom cane sugar refining industry, by their families, and by all those who obtain a living from the production of that crop in the African Caribbean and Pacific countries.
At one level, my deep concern is shaped by the important fact that the one remaining cane sugar refinery in Scotland is in my constituency. It is owned by Tate and Lyle, which owns another and bigger cane sugar refinery in the constituency of my hon. Friend the Member for Newham, South. In Greenock, 400 people are employed in the refinery. As I have said before in the House, the refinery in Greenock is an integral element in the Scottish food and drinks industry, which employs between 16,000 and 20,000 people. Their fear, which is felt by many people in the ACP countries, is that Her Majesty's Government may agree to an increase in the United Kingdom's total sugar beet quota.
That deep anxiety is shared by my constituents' employers. On Friday I received a letter from Mr. Tomlinson, a director of Tate and Lyle, who said:
There is a surplus of sugar throughout the EEC and in the UK. Thus the Commission is not proposing to change existing production quotas. In contrast, however, the UK beet industry is arguing for an increase in its quota. If this were to he granted it would have substantial repercussions for cane sugar refining. Over 400 jobs would be lost as a result of the closure of Scotland's only sugar refinery and many more jobs in Scotland's food and drinks industry would be at risk.
Recently, I have had cause on more than one occasion to mention in the House the scandalously high levels of unemployment in my constituency.
An increase in the United Kingdom beet quota would swell an existing sugar surplus. The European Commission would surely refuse to allow increased surplus production being dumped on the world market, which is already suffering from a severe depression. It has been argued that in the near future sugar could become an important feedstock in the chemical industry. That argument is buttressed by the threat that if there is not an adequate supply, the United Kingdom chemical companies will build plants in France and other Community countries. Others argue that there is no case for an increase in the United Kingdom sugar beet quota.
A document from Tate and Lyle states


Existing UK sugar supplies are more than adequate to fulfil the anticipated additional UK demand for sugar for industrial uses.
There is already a large EEC beet surplus which is having to be dumped on depressed world markets at prices well below cost in competition with developing countries, thereby ruining their economies.
I am being asked about the people in the beet sugar industry. I am concerned for them, but their position is not affected by what is happening to the cane sugar industry.
In addition, I have mentioned the threat to the people involved in the food and drinks industry in Scotland. For those reasons, my hon. Friends and I tabled the amendment, which refers to a resolution of the House. I sincerely hope that it meets with the approval of the House.

Sir William Clark: I hope that the hon. Member for Greenock and Port Glasgow (Dr. Godman) will excuse me for not speaking to his amendment. I should like to follow the theme of my right hon. and learned Friend the Member for Hexham (Mr. Rippon), and thank my hon. Friend the Minister for giving an undertaking that the ACP sugar quotas would remain intact.
I remind the House that the ACP quotas came about because of the cessation of the old Commonwealth sugar agreements. Invariably, all the ACP countries from which we take cane sugar are Third world countries. That is an important factor. Until recently I was a director of Belize Sugar Industries, and I am now a consultant to Tate and Lyle. When we joined the European Community, two thirds of our sugar consumption was cane sugar, but now it is 50 per cent. The ACP countries are unquestionably worried about the continual pressure on cane sugar. They do not want to see any more erosion of their quotas, and my hon. Friend has assured them of that.
The ACP countries have met their quotas, but, nevertheless, they look at the European market and see that even in the United Kingdom we have a sugar surplus of 200,000 tonnes a year. As the hon. Member for Pontypridd (Mr. John) said, the excess in the Common Market is 3 million tonnes. That must be frightening for a country whose staple crop is cane sugar.
When we talk about the alternative uses of sugar, for example chemical ones, even MAFF has predicted that the maximum increase in consumption for the chemical industry would be about 50,000 tonnes. The British Sugar Corporation is asking for an increase of 350,000 tonnes, even though we have a surplus of 200,000 tonnes. If in 1991—let there be no mistake that we shall have to wait six years for this—there is an increase in consumption of 50,000 tonnes, that will still mean a surplus of 150,000 tonnes.
The price of sugar is depressed throughout the world simply because of the glut, and in no circumstances should we increase the quotas for the EEC. My right hon. Friend said that the quotas that we gave to the ACP countries were generous. That is a point of view to which I do not necessarily subscribe. As my right hon. and learned Friend the Member for Hexham said, we have a moral obligation to the old Commonwealth Sugar Agreement countries, and we should remember that they are Third world countries.
In many cases a Third world country has two quotas—an EEC quota and an American quota—and the balance of its production is sold on the world market. The EEC quota is sacrosanct, and in many cases the American quota has just been reduced under the Carribean initiative precisely to protect the sugar industry in the United States. Therefore, these ACP countries have already suffered a blow.
Some Opposition Members criticise the Government's aid programme and say that it is not sufficient. Personally, I do not believe that we should be ashamed of our aid programme, but we are wrong in not helping the ACP countries. If the chemical industry wants more production, let us increase the quotas for the ACP countries, because economically that would be far better.
From a political point of view, we should remember that the staple crop of an ACP country is cane sugar. It is all very well for people in the United Kingdom to say, "Let them diversify," but in many instances such countries cannot grow something else because the agronomy is not good enough. Beet sugar is grown in a temperate climate, where there is far more opportunity for diversification—[HON. MEMBERS: "Into what?"] Cereals, barley and so on. Temperate climate countries have a better opportunity of diversifying than have Third world countries.
If cane sugar comes under attack and there is an erosion in production, there is the possibility of the closure of the Greenock refinery[Interruption.] My hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh) says that the Lincolnshire farmers are impoverished, but I doubt whether anyone else would agree.
As for employment, we are not arguing that the beet industry should be cut. It wants to increase its production. Leaving aside the economics of the argument, we must realise that cane sugar is extremely labour intensive. If there is a world reduction because of our quota system, a political vacuum will be created and the West will have to pick up the bill and give more and more aid. I am convinced that it is much better to give Third world countries trade rather than aid.

Mr. Gordon Oakes: I wish to confine my remarks to what the Minister and my hon. Friend the Member for Pontypridd (Mr. John) said—the importance of starch and sugar to the chemical industry. There is a market for starch and a growing market for sugar provided as my hon. Friend correctly said, the chemical industry can buy at world prices. He said that the chemical industry's sugar consumption might remain the same, unless that were to happen. I am more doubtful than my hon. Friend because this country's chemical industry must compete with the world chemical industry which buys at world prices.
The starch agreement is relatively good. It is welcomed by the chemical industry and the Chemical Industries Association. The sugar agreement, in particular sugar agreement No. 9178/85, does not go far enough. The only answer for this country's chemical industry, as my hon. Friend the Member for Pontypridd said, is to amend it or to introduce a new regulation which will allow the chemical industry to buy at world prices. We are not talking, as are the regulations and the common agricultural policy, of sugar as a food. We are talking of it as a feedstock which can provide an exciting new industry. I shall tell the House about some of the new developments


that can take place within the chemical industry, provided that the price of feedstock meets world prices and the rebate brings the cost down to world prices and not to a percentage of them. In that event, instead of having two hands tied behind its back, it would merely tie one of the industry's hands behind its back.
This country is in the lead in the development of various new chemicals. They can provide considerable employment and attract capital investment. One of the developments is a type of plastic called PHB. We are ahead of the world in its development. We are being restrained in the development of that bioplastic because of the price of sugar as a feedstock to the chemical industry. Xanthan gum is another of our developments. I have as little knowledge as most other hon. Members of these matters, but xanthan gums are used for oil tertiary recovery. It will be important when our oil starts to run out in years to come that we have a home-based chemical developed by our chemical industry to assist in the tertiary recovery of oil. There are many exciting developments—for example, single cell oils, enzymes and microbial cultures—taking place in our chemical industry.
I have intervened because I have a chemical industry constituency and I am deputy chairman of the House all-party chemical industries group. The Chemical Industries Association asks Ministers and the House to cease regarding sugar as a food only and regard it as it truly is—an important feedstock for the British chemical industry which can provide jobs for many thousands of people.

Mr. Edward Leigh: I represent one of the prime sugar beet growing areas of this country. The Bardney factory is in my constituency and the Brigg factory is just over the border in the constituency of my hon. Friend the Member for Brigg and Cleethorpes (Mr. Brown), who is in his place for this debate.
Farmers in my constituency are in a quandary. They are possibly the most efficient in the world and they farm some of the most intensively cultivated land in the world. They are told that they are over-producing cereals. Where can they turn? They cannot turn to milk or potatoes, because those products are already subject to quotas, and there is little possibility of turning to sugar under the present quota arrangements.
That is an intolerable situation. We consume more sugar per head than any nation in Europe, but our sugar beet quota covers only 49·7 per cent. of consumption at 1·144 million tonnes. Our consumers have a right to the best sugar at the lowest price on offer. The farmers of Lincolnshire are ready to offer them that sugar but are denied that opportunity by our EEC partners.

Mr. Jim Lester: Will my hon. Friend give way?

Mr. Leigh: No, we have had enough spokesmen in this debate for the sugar cane industry. I intend to stand up for the sugar beet farmers of this country. We all know the historical reasons for the discrimination against them. It is King Cane. The Government must decide what is their first priority, Barbados or Bardney, Brazil or Brigg. The cane producers have had it too good for too long. We can no more allow old loyalties to maintain artificially high quantities of cane to the disadvantage of our sugar beet

producers than we should maintain artificially high imports of New Zealand butter to the disadvantage of our dairy producers.
It is intolerable that our sugar beet quota covers only 49·7 per cent. of consumption while in other EEC member states the proportion ranges from 102·5 per cent. to 232·7 per cent. in Luxembourg. Current United Kingdom consumption is 2·3 million tonnes, and by 1990 it will have increased by more than 250,000 tonnes.
As the right hon. Member for Halton (Mr. Oakes) has said, we look especially for new opportunities in the biotech industries. The possibilities exist to use our sugar beet for the manufacture of pharmaceuticals, cosmetics, paints, bakelite, wood stabilisers, polymers, washing-up liquids and even citric acids. Those new industries should be set up near the large sugar producing areas of this country, not in Brazil. Without an increase in our quota there will be no secure source of supply for those new industries.
The Government must press for an increase in our sugar beet quota, first, by reallocating quotas from other member states. If that is not possible, as the United Kingdom is the only EEC state disadvantaged and discriminated against, a special case should be made out for this country. At the very least, we should restore the 1981 cut, leaving all the other quotas unchanged.
Since joining the EEC we have pursued a responsible sugar beet quota policy. Is our good behaviour to be rewarded by a stagnant industry? I ask my hon. Friend the Minister to hold true to his words of 20 November when he said that the Government would insist that Community measures did not discriminate unfairly against the United Kingdom. The insisting must start here in this House today.

Mr. Nigel Spearing: The hon. Member for Gainsborough and Horncastle (Mr. Leigh) is right to say that there should not be discrimination against the United Kingdom, but I thought that in the balance that he mentioned beet quotas had been substantially increased as a proportion of domestic sugar production and consumption over the past 10 to 20 years. Assuming that that balance has been reached, the question is whether we need an overbalance.
I speak with two hats in this debate—as Chairman of the Scrutiny Committee, which produced a number of reports on the documents before us, and as a constituency Member, having put my name to the amendment tabled by my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman).
There ar three groups of problems. Documents COM(84)620 and COM(85)504 deal with possible new outlets for our sugar surplus. My right hon. Friend the Member for Halton (Mr. Oakes) pleaded the case of the chemical industry. The Select Committee on European Legislation said in its report HC 5-xxx, 1984–85:
The Commission points out that the European Council of Chemical Manufacturers' Federations has said that if sugar were available at less than Community prices up to an additional 450,000 tonnes pa could be used by 1990.
I presume that that is in the chemical industry. Whether taking crops from the ground and putting them through chemicals is a good way of dealing with natural resources is another matter.
Document COM(85)498 deals with the current marketing year. I did not detect a specific report from the


Minister to explain what is happening within the Council of Ministers about the current sugar year. I hope that he will tell us about that when he replies, and also about the problems in COM(85)433 with the new five-year regime.
We are discussing three issues that have been rolled into one multi-purpose motion. It was the all-purpose and non-specific nature of the motion which caused my hon. Friend the Member for Greenock and Port Glasgow to table a specific amendment to something that had already been decided by the House.
The attendance in the Chamber and the interest shown in the debate show how important the topic is. I think that I counted 18 Members rising in their places and seeking to catch your eye, Mr. Deputy Speaker, a few minutes ago. When the Minister opened the debate, he did not spell out the three issues that are before us. I do not think that he mentioned one of the documents numerically, which I found rather disappointing after the reports of my Committee and the memoranda which the right hon. Gentleman has submitted. I am aware of the pressure of time, but I wonder whether that is the right approach to these matters.
I shall conclude by taking off my Chairman's hat and putting on a constituency hat. I know that the House will not deny that right to every Chairman of a Select Committee when the time comes.
When the Minister began his speech, he made some conciliatory and helpful remarks about the Third world and the moral duty which the House has in continuing the arrangements of the Commonwealth Sugar Agreement and in upholding undertakings that the Community made to our Commonwealth partners. A great moral issue is facing the First and the Third worlds, and I am glad that the Minister referred to it. However, I do not understand his reluctance to declare his attitude to the amendment, which merely refers to a resolution of the House about 10 years ago.
The Minister said that he would listen to the debate, and here is my contribution. If the Minister has to listen to the debate to decide whether he will reiterate an undertaking, objective or view expressed by the House about 10 years ago, that is a pity. I see that the Minister shakes his head, which relieves me. I shall take it that he agrees with the objectives outlined by the House 10 years ago, and as quoted by my hon. Friend the Member for Pontypridd (Mr. John). If, as I apprehend, the Minister agrees with those objectives, he must accept the amendment. If he does not, and if the House shows some disagreement over the matter, the only inference to be drawn is that there has been some slippage between what the House decided 10 years ago and what the Government want today. I do not believe, from his opening remarks, that the Minister meant that, but that would be a possible interpretation if he says that he cannot accept the amendment, which only reiterates the status quo. I do not believe that the Government would wish to indicate that the status quo has changed.

Mr. Colin Moynihan: Until my election to represent the people of Lewisham, I was employed throughout my working life by Tate and Lyle. The contractual relationship lasts to this day, and therefore I shall declare an interest.
I support the motion, but there are problems within the operation of the sugar quota system which, even with the terms of the motion, can be tackled effectively by the Minister in the forthcoming round of negotiations in Brussels, which can in turn secure the future of the Westburn refinery.
In support of the proposals that we are considering, it is argued that there are many reasons why there may be an increase in United Kingdom sugar demand between 1986 and 1991. Where will the increases come from?
I agree with the Minister that the Commission believes that there could be some substitution of glucose by sugar in fermentation uses. However, the total change is not expected to be more than 50,000 tonnes. The beet lobby argues that sugar will become an important feedstock in the chemical industry. However, even the most wildly optimistic estimate of sugar for such use is only 100,000 tonnes, and most industrial experts consider that the increased demand is likely to be no more than 10,000 tonnes a year during the next five years.
The right hon. Member for Halton (Mr. Oakes) spoke about the pharmaceutical use of sucrose as a base. First, ICI has made the plastic substitute PHB, which is an important development that could become a competitor functionally for polyesters. But it could become a competitor only if the feedstock was priced at between £80 and £110 per tonne, based on the world price during the past two to three years, not—as the proposals before us suggest—at £250 or £260, which is the B quota net of levy. Even the Chemical Industries Association says that there is no chance of that happening or of the pharmaceutical industry taking that amount of sucrose coming on to the market at £250 or £260 per tonne.
The second important factor to remember about ICI is that production technology is at an early stage and that the applications technology is even further away. The problem with the RHM microprotein—hon. Members will be aware of that product, which has been widely publicised—is that glucose is a much-preferred substrate, anyway. One disadvantage of sugar as a substrate is that it causes effluent problems, so it would be much more preferable to use glucose. Indeed, there is at present no competition with starch.
For these, and or antibiotics and blood plasma extenders, there is very little expected demand from the chemical industry. Much research has been carried out on polymers oil recovery and on xanthan gum, not least in Knowsley by Tate and Lyle. It is expected that production will require no more than 1,000 or 2,000 tonnes of sugar between now and 1991. Finally, citric acid is made from molasses, which is an uncontrolled commodity and cheaper than world price sugar. Unless EC sugar is offered at the world price of the past two to three years, none of those will be tenable commercial objectives for production during the next five to six years.

Mr. Lester: We listened to my hon. Friend's enthusiastic support of British sugar beet farmers. Would they be prepared to produce sugar at those world prices rather than at the heavily subsidised EC prices?

Mr. Moynihan: The answer is certainly not. They would not even be prepared to produce sugar at the proper B quota price at a levy of 39·5 per cent., rather than a composite levy.
But even if the figures of 50,000 tonnes and 100,000 tonnes were correct—the House should beware


accepting them readily—the increased demand would be only 150,000 tonnes, which is already less than the surplus in the British sugar market of 200,000 tonnes. Therefore, even if we accept those figures—I do not—we are already in surplus to the tune of 200,000 tonnes. On that basis, there can be no argument for an increase in beet quotas.
The British market is divided approximately 50–50 between cane and beet sugar, and hon. Members will be aware that 100,000 tonnes of cane sugar is refined in an area of high unemployment on Clydeside, at the Westburn refinery in Greenock. The difficulty with the proposal before the House and the discussions that may have preceded tonight is that they may allow the British Sugar Corporation to increase its production by up to 200,000 tonnes of additional quota. That figure represents 9 per cent. of United Kingdom demand, and the proposal is to add it to a market which is already oversupplied by 10 per cent.
Sugar for the domestic market is produced under an A and B quota system carrying a differential levy. After payment of the levy, sugar is produced under the two quotas, it is in free circulation and is almost indistinguishable. In 1985, the United Kingdom's A quota was 1·04 million tonnes, carrying a levy of 2 per cent. As hon. Members will know, the B quota of about 104,000 tonnes—just 10 per cent. of the A quota—carries a total composite levy of 39–5 per cent. The levy is paid by the producer.
The whole point of the original proposals was that quota A was intended to equate to an approximate Community consumption and quota B was originally designed for specialisation, to encourage producers of high efficiency to produce the marginal additional sugar required. In effect, the idea was that only a producer with a 40 per cent. cost advantage equivalent to the quota B level would be encouraged to produce marginal sugar under quota B, but that has not happened, not merely in the United Kingdom, but in all European countries.
Growers and producers have worked together on an average pricing system, which effectively eliminates the disincentive effect of the much higher tariff under the quota B system. The result is that all sugar allocated under any form of increased quotas will be produced, and at an average of the marginal levy of approximately 5·4 per cent., whereas the marginal levy under quota B would, if the system were working properly, as it was set out and intended, be a 38·5 per cent. levy.
Because of this abuse of the two-tier system, it is certain that the whole of any additional quota being produced would be supplied into the market by BSC, and because of the nature of the BSC operation, the substantially increased volume of throughput would lead to average unit costs falling. At the same time, because of the increased average levy implied by the change of the ratio of B quota to A quota, the intervention receipt that is the basic intervention price—the average levy payable—will fall.
BSC, having much more of the margin with which to manoeuvre in the market, will compete against Tate and Lyle, and will be in a position to do so, but, because of the protective market in which it operates, caused by the process that I have described, the BSC will force 100,000 tonnes of sugar out of the United Kingdom market, and

that will mean the closure of a fundamentally important job provider in Scotland. That is what is critical in this debate.
It is not palatable to hear B producers argue that if we do not go ahead with the proposals there will he a loss of jobs in beet because the debate is about an increase in quota, not a status quo. If the status quo remained, BSC would not be losing jobs. It has not publicly said so, but we know that if there is an increase in the quotas, because of the system working as I have explained there will definitely be job losses at Greenock for cane refineries. That is the critical point.
The international consequences of this would be serious. The importance of them is that the ACP countries will lose out. If there are 100,000 tonnes less of supply coming into the British market, even if it is shifted to Portugal—which has 50,000 tonnes given to it under the accession arrangements for its entrance into the Community—Portugal could still need 250,000 tonnes which it gains from either ACP supplies or the world market, and 100,000 tonnes will need to be shifted cross to Portugal, leaving 100,000 less coming from the world market. Yet again, there will be a depressed price for world sugar in countries that cannot even now supply at the world market price because it is so heavily depressed by flooded, over-subsidised European beet that is below the production costs of even the most efficient cane producers world wide, who have a competitive advantage in the production of sugar.
It surprises me that hon. Members who regularly argue for the workings of a free market, and argue to ensure that we have effective free competition, based on good quality competitive price and delivery terms—all the arguments of the free marketeers—suddenly pop up one evening, throw all that out of the window, go for massive protectionism, the like of which is even subtly suggested at being at a different level from that which quota A and quota B intended, and then happily appear tomorrow arguing in favour of free competition. If that point does not go home to everybody inside and outside the House, no other point will.

Mr. Guy Barnett: I agree with the speeches of the hon. Member for Lewisham, East (Mr. Moynihan) and my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman). My views on the subject are well known and they accord with what has been said by both hon. Members.
I do not want to get involved in the cane-beet debate, not because I am not interested in it but because I have yet another constituency interest, and there are many in this debate. A firm called Tunnel Refineries is in the forefront of converting from traditional maize wet milling capacity to the utilisation of United Kingdom wheat. By the spring of next year it expects to have achieved between 40 and 50 per cent. replacement of its raw material capacity by United Kingdom wheat. Therefore, in that respect the firm—no doubt this applies to others which make use of United Kingdom wheat as a raw material for starch and glucose production—can and does make a significant contribution to reducing the scandal of mounting United Kingdom intervention stocks of wheat.
Some hon. Members may have noticed The Sunday Times article on 17 November showing that some 330 secret grain stores exist in Britain, in which some 6 million


tonnes of surplus wheat and barley are stored. The total value of the surplus supplies is estimated to amount to a staggering £700 million. surely equally worrying is the fact that maintaining that piece of expensive nonsense costs the taxpayer £72 million a year.
At present, the United Kingdom consumer consumes in excess of 750,000 tonnes of starch and glucose based upon the conversion of cereals. Indeed, United Kingdom companies have a capacity in excess of 1 million tonnes. However, in spite of its intention to maintain internal cereal prices well above world price levels, the Commission also proposes to increase the cost to the consumer even further by removing the production refund for starch required by the food industry. It appears to think that all food products are protected from world price competition by the common agricultural policy.
I understand that the Ministry of Agriculture, Fisheries and Food has identified a number of important products, including soft drinks, beers and baby foods, which are not so protected. The Commission proposes to retain the production refund for only a limited number of products for industrial application. The effect of that will be increased food costs for the consumer and reduced willingness of United Kingdom manufacturers, such as Tunnel Refineries, to invest in the plant required to convert grain surpluses. If the Government were to encourage the conversion of grain surpluses, the United Kingdom starch and glucose industry could consume over 1 million tonnes per annum.
If that wheat is to be stored in intervention the cost is 35 ecu a tonne. If exported out of the EC, the cost of export refunds is 77 ecu a tonne. So the total cost of storage and export is 112 ecu a tonne, while the starch and glucose manufacturers receive only 27·79 ecu a tonne under the current starch regime. That is a potential saving of 84 ecu a tonne; a saving which I am told can be estimated at some £52 million a year.
In view of that, I ask the Minister to oppose the loss of the production refund on starch on food and other purposes which is proposed under the new starch regime. I am told that the Dutch are insisting on special treatment for their potato starch industry, so why are the Government not insisting on special treatment for our industry? I would expect them to be more robust than they appear to have been so far in defence of our national interest as well as the interests of my constituents.

Mr. Deputy Speaker: It may help the House if I say that the Minister would like to begin his reply at 11·35 pm.

Sir Eldon Griffiths: I am a sugar beet man. I live among sugar beet. The main view from my window is of the largest sugar beet factory in Europe. I agree with the Minister of State that we have an obligation to the African, Caribbean and Pacific countries and that we must stick to it.
I regret that this debate has turned into an argument between Liverpool and Greenock on the one hand and Bury St. Edmunds and Gainsborough and Horncastle on the other. It is not an argument between Tate and Lyle and the British Sugar Corporation. It is an argument about how this country is to obtain a larger share of what the European Community is producing for this country.
My proposal is simple. There is a case for justice to be done to efficient British agriculture. This must not be done at the expense of ACP production. It must be done at the expense of some European countries that have higher quotas than they need. Our quota is lower than it ought to be. When the quotas were fixed, British agriculture was unfortunate enough to have had a bad year, and our production fell. Consequently our quota was set at the wrong level. I hope that my right hon. Friend will seek to obtain from the European Community an improved quota for the efficient British sugar beet industry, at the expense of those in Europe who can afford to give it to us.

Mr. Ron Leighton: Not so very long ago I went to Belize on behalf of Mr. Speaker to present to the Parliament of that country its Speaker's chair. The importance of sugar to that country's struggling economy was impressed upon me while I was there. There has been a slump in the world sugar market, caused by the heavily subsidised dumping of surplus beet sugar by the European Community. It is causing deepening poverty in the already poor tropical and Third-world countries. As a result of dumping, prices on world markets have been below the cost of production anywhere in the world. That is immoral. It is blighting and destroying the hopes of those countries.
I thought that the Conservative party believed in free markets and in removing market rigidities, but that does not appear to apply to sugar. Rigid protectionism is being applied. Therefore, stocks are at an all-time high. They are equivalent to half the world's annual consumption of sugar. However, the production of beet sugar in the Community, bolstered by protection, is defying all the economic laws of gravity. The European Community price is six times higher than the world price.
The talks on the international sugar agreement have collapsed. There is now a free for all, which means that those countries with the biggest subsidies are winning. Therefore the richer farmers in the richer countries are enjoying the largest subsidies.
The European Community is one of the main culprits. Western Europe used to be a net importer of sugar. It is now one of the biggest exporters. It unloads millions of tonnes of subsidised sugar. Its exports have escalated dramatically. They trebled between 1978 and 1984. Western Europe's world market share is now 25 per cent. This is obtained by subsidies of up to 85 per cent. of the European Community's internal price. How can that be justified? Nor should we be deluded by the myth that this is self-financing. It is nonsense to think that the levies mean that the producers are financially responsible for the disposal of sugar surpluses. Producers get such a high price for quota sugar that they can easily afford to export surpluses at marginal prices.
Price discipline is the only sensible course. It is our duty to call for a change. The quotas result in an unseemly scramble for shares. Britain comes off worst, as usual, in the European Community, but that is another story. The cost of the sugar regime is 2 billion ecus. That is the cost not to the budget but to consumers because of artificially high prices. This is bad for the consumer. It is also bad for sensible farming in this country and for the Third world. It should be opposed by Parliament and by the Government. I hope that the Minister's constructive and conciliatory words in his opening speech will be carried


through to his closing speech. I hope that he will assure the House that there has been no slippage and that he will accept the amendment.

Mr. Gummer: My hon. Friend the Member for Bury St. Edmunds (Sir E. Griffiths) said that it is sad that this should have developed into an argument between the cane sugar and the sugar beet interests. The argument is more complex than that. I take seriously his point about the continuing concern in this country that the original arrangements for the quota were based upon a year that was atypical. That must mean that the British sugar beet industry feels that it has been done down by the rest of the European Community. That is why I said that it was not unreasonable to look for a redressing of that balance. However, when a system is in place, that is rather difficult.
I must tell the hon. Member for Newham, North-East (Mr. Leighton) that the problems that he adumbrated about those in favour of the free market can be turned on their heads. He is not noted for his battling in support of the free market in other areas. We are trying to find an answer to two very different interests, both of which are concerned with jobs, both of which are important and neither of which can be ignored.
I listened with considerable care when the hon. Member for Greenock and Port Glasgow (Dr. Godman) spoke to his amendment. I am not especially happy about the wording of the amendment, not least because it refers to 1·4 million tons, which he knows became 1·3 million tons through no fault of this country, but because the countries concerned did not wish to take that extra amount. He will understand that my hesitance is not because I wish to slide or to slip. I am sure that the hon. Member for Newham, South (Mr. Spearing) would acquit me of being of the temperament to do so without a good deal of previous announcement.
I do not like the wording of the amendment because it may be read as suggesting that we are not already doing the things that it suggests when in fact the achievement of the Government and the Community is to carry out precisely what is contained in the resolution of the House. Therefore, I should be sad if the amendment were read as an indictment of what we have done since 1974.
If the hon. Member for Greenock and Port Glasgow will accept that those aspects are not central to what he is proposing, I believe that it would be even more misleading if I recommend to the House that it should oppose the amendment. I am sorry that the hon. Gentleman has put the House in this position. If I oppose the amendment, it might be thought that the Government were in some way resiling from the position that they and previous Governments have taken. Therefore, I shall recommend that the House accepts the amendment. I hope that the hon. Gentleman will take that in the spirit in which it is said.
As I said in my opening remarks, I am confident that the United Kingdom will continue to provide a secure market for ACP sugar, provided that the price remains competitive with Community beet sugar.
I hope that my hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh) will, in retrospect, agree that to suggest that ACP countries have had it too good for too long is not entirely true. With a country such as Barbados, it is difficult not to accept that the standard of living, the dependence on a single crop and

the problems that it faces really cannot make it comparable even with farmers in Suffolk—and I say that representing a Suffolk constituency.

Mr. Clement Freud: rose—

Mr. Gummer: Social Democratic and Liberal Members have been present throughout the debate. Because it is difficult to formulate a reply, they have not said anything about the issue. I do not intend to give way.
We must consider the issue carefully. My right hon. and learned Friend the Member for Hexham (Mr. Rippon) fairly put his finger on our moral responsibility to the ACP countries. I hope that my hon. Friend the Member for Croydon, South (Sir W. Clark) and others who pressed the issue will accept that in the circumstances of some increase in likely demand—not only because of the new accessions of Spain and Portugal, which we welcome, but because of the likely changes in the demand from the chemical industry—it would not be unreasonable to try to obtain some redressing of the balance for beet sugar. I do not think that such a redressing would have the dire consequences—it would not go far enough for that to happen—that my hon. Friend the Member for Lewisham, East (Mr. Moynihan) suggested.
My hon. Friend pointed to some of the technological changes and warned against being over-enthusiastic about the new markets and opportunities. I hope that the Ministry of Agriculture, Fisheries and Food has at no time been over-enthusiastic, but it would be wrong to ignore some of those opportunities, and it certainly would be wrong not to organise ourselves so that we can take advantage of those opportunities. I agree with my hon. Friend that we must fight for the interests of this country within the Community, however communautaire we may be.

Mr. Bowen Wells: rose—

Mr. Gummer: I hope hat my hon. Friend will forgive me if I do not give way. Only four minutes remain and I have some important points to raise, particularly in reply to the hon. Member for Pontypridd (Mr. John).
We are fully alive to the problems to which the hon. Member for Pontypridd referred in relation to the coming five years. He was right to say that the proposals now before the Council are not the same as were originally proposed. In the end we must arrive at an agreement between all the countries. I have looked at the issues carefully, and we are continuing to consider the way in which those matters will fall country by country.
There is no reason at present to suppose that we cannot produce an answer which may mean it being a self-supporting regime. The hon. Gentleman was right to say that the argument becomes much less reasonable if it is not self-supporting; it must be that, and we are determined to achieve it. It may have to be achieved in a different way from that originally proposed by the Commission. I am alive to the points that he raised, and we will do what we can to ensure that they are met.
I assure the hon. Member for Greenwich (Mr. Barnett) that I remember the Tunnel Company well from the time when I failed to win that seat from his predecessor. I appreciate the problems with which it is faced.
In the long run, it must be reasonable not no protect people twice, once by subsidy and again by exterior protection. The hon. Gentleman pointed out that some


products were not protected by an exterior tariff and that they would not be protected even once if we removed the subsidy. We have gone a long way in changing the Commission's proposal, and I assure him that we have been extremely robust on this issue.
We have moved a long way already and we shall continue to press the matter because we want to continue to help those areas where starch would not otherwise be protected, while removing the double protection at a speed which will not undermine the stability of the starch-producing industry.
My hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh)—I question the words he used about the ACP countries—was right to remind us that we cannot ignore the fact that sugar beet is an important crop for large areas of Britain and that the continued viability of the sugar beet industry is vital for jobs and agriculture here. However, he must accept that a balance must be kept and that our commitment to the ACP countries must continue. It is a moral commitment from which I hope no hon. Member would wish us to resile.

Amendment agreed to.

Main Question, as amended, put and agreed to.

Resolved,
That this House takes note of European Community Documents Nos. 8687/85, 9178/85 and 8781/85, relating to the sugar sector and 11172/84 and 8688/85, relating to the reform of the starch regime, and supports the Government's objectives to secure satisfactory agreements on them which take account of the interests of both producers and users of the products concerned, and fulfil the objectives set out in the Resolution of the House relating to sugar supplies of 11th November 1974.

Forestry

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Peter Lloyd.]

Mr. Archy Kirkwood: The borders and south-east Scotland as a whole represent a perfect geographical and topographical area within which to consider the wider national and international aspects of forestry as well as the important part that it has to play in the local borders rural economy.
I remind the House of the inordinately high level of imports of timber and related products that is countenanced at present. We spend about £4,000 million per annum on importing raw material—92 per cent. of total United Kingdom requirements. Home-grown timber could secure a high level of import substitution, which would benefit local economies such as south-east Scotland and the country as a whole. As only 9 per cent. of the United Kingdom is presently planted as commercial forest—although the figure in the borders is nearer 12 per cent.—there is clearly capacity available to achieve that high level of import substitution.
The production potential of our present forestry is maturing fast, and I understand that it is expected to double in the next 10 years. Therefore, we are on the brink of a significant potential expansion of the whole forestry enterprise and its related harvesting and processing industries.
In my last Adjournment debate on the borders two years ago, I expressed my fear that the Government were proposing to dismantle the Forestry Commission by stealth, by allowing wholesale and indiscriminate disposal of large expanses of forest in areas such as the borders. While still being critical of aspects of that policy—principally its continued insistence on keeping the purchase prices and the identities of purchasers secret—I am less worried now than I then was. It is true that two large forests in the borders have been sold. but the policy announced in 1984, which put the emphasis on rationalisation, has had an important and welcoming effect on the forestry enterprise and the morale of the local work force.
I pay tribute to those who work for the Forestry Commission in the borders. They are a dedicated band of professionals who carry out physically demanding and often dangerous jobs with a great deal of skill. They have played their part in achieving the results announced recently in the Forestry Commission's annual report. Those results show that they are ahead of financial targets set for them by Ministers.
If the amalgamation of the conservancies and the slimmed-down organisation is delivering the goods in the way that it seems to be, why not allow the commission to develop and refine its rationalisation policy to include purchasing forests and planting land where it can be shown that it would make economic sense to do so? At present the savings made go back to the Exchequer, and there is very little local incentive in south-east Scotland or elsewhere to do better simply to line the pockets of the Chancellor of the Exchequer.
I welcome the statement that was made some months ago by the Minister of State who sits in the other place, when he publicly embraced the concept of a mixed economy in forestry. I support that view, but the Minister


will be aware that the private forestry interests in the borders and elsewhere have recently been expressing some concern at the way in which the Department continues to administer the forestry grant scheme, and the consultation process involved in that scheme, when it comes to releasing land for forestry.
The view is that the Department is still adhering to the principles adumbrated first in 1939, when grazing land and lower pastures were completely sacrosanct from afforestation. Will the Minister accept that times have now significantly changed? Will he accept that, against the background of agricultural surpluses and the current debate about agricultural land use, forestry should be considered as a part of the solution to the surplus problem?
Private industry, as well as individual farmers, can play a part in future, to everyone's benefit. Of course, there must be safeguards in terms of the integration with the livestock sector, which is very important. There must be safeguards in terms of access for the public and the preservation of rural jobs. Both private industry and farming interests would measure up, if they were given a lead by the Government, to achieving most of the aims and objects. As an example of the sensitivity of private industry to some of those aspects, I cite the publication of the "Forestry and Woodland Code", produced recently by Timber Growers UK. It is a voluntary code, but I believe that it is a welcome contribution to the debate on conservation.

Mr. John Home Robertson: The hon. Gentleman has been generous to the private sector. He has been talking about safeguards to protect aspects of land use. He must be aware that in his constituency and in part of mine, which is on the border of the hon. Gentleman's, large areas of marginal farm land have recently been planted without the consent of the Forestry Commission or the Ministry of Agriculture, Fisheries and Food. Is the hon. Gentleman not concerned about the uncontrolled blanket of afforestation of some areas of south-east Scotland?

Mr. Kirkwood: That is a useful intervention, because it substantially contributes to my next point. There are potentially serious problems in the issue raised by the hon. Member. The Department cannot sit back and wash its hands of the problem, which may, if the industry does not face its responsibilities, lead us towards the introduction of planning regulations for forestry and agriculture. I am loth to pursue that line, but it is up to the industry, and I think that it should be given a chance with the voluntary code that I mentioned. I agree with the point made by the hon. Member for East Lothian, that if the industry does not adhere to the code, it will have to pay the price and face statutory regulations, which will not be in anybody's interests, but which may be inevitable.
In the statement last week announcing the relief for the bad summer weather, I noticed that the Minister said that he was prepared to implement article 15 of the European Community's agricultural structures programme. Surely that announcement, which if introduced will allow farmers to claim HLCAs for up to 15 years if they take stock off the land and plant trees, points to one of the ways forward. We could introduce a sensible scheme of farm forestry. I recognise that there are difficulties in planting a standing crop that lasts for 40 years before it matures and can be harvested. That produces legal problems for the traditional

farm tenancy arrangements in Scotland, but I believe that, with application, and if the Government took a positive lead, we could resolve some of the problems to the satisfaction of farmers, who want to turn some of the their surplus agricultural land over to afforestation.
Last week's announcement by the Minister to deal with the problem south of the border points the way forward for farm forestry. If that is the way that the Ministry in England has chosen, a more flexible approach is required from the Department of Agriculture and Fisheries for Scotland to releasing land of better quality than class 4B, if it is suitable for sensitive exploitation by the private sector for agricultural interests. In evidence I quote the chairman of the Nature Conservancy Council, who said:
forestry should be encouraged on lower land and grants should be paid to support sheep farming on higher land.
That quotation is from The Guardian of 26 November 1985.
I was also interested to read a written answer that the Minister gave to his hon. Friend the Member for Stirling (Mr. Forsyth), who
asked the Secretary of State for Scotland if he will list the number of local jobs per hectare supported by the principal land based activities in Scotland.
The Minister replied:
The numbers of local jobs provided per 1,000 hectares by the principal land based activities in Scotland are as follows:



Number


Dairy farming
31


Lowland crop and stock farming
22


Upland mixed farming
8


Forestry
7


Hill sheep farming
1"


—[Official Report, 4 December 1984; Vol. 69, c. 150.]
I am sceptical about those figures, as I was brought up to believe that in a contest between sheep and trees, one is always safer with sheep. I am interested in the figures, and it is right that we should look at them carefully. If the figures are right, we should look at forestry in terms of employment as well as in terms of taking surplus agricultural land out of use.
If all that is to happen, the Government will need to consider adopting a more radical and open policy , not just for land use, but for providing infrastructure support. I shall give an example in the south-east of Scotland. The Borders regional council no longer has access to European Community infrastructure grants because its development status has been removed. It cannot repair roads, much-needed and used by the industry, whether public or private, from the needs element of the rate support grant. I shall not go into that further. It is a subject for another debate on another day, probably tomorrow, if the press announcements are right.
The Government will need to sponsor research and to develop the downstream industries, and not just confine their interests, as they have in the past, to securing the planting of trees. They will also need to turn their attention to training young people to become not just foresters and harvesters, but forestry processors. As the Minister may know, the Scottish Development Agency, in association with Borders regional council, is looking at two areas in my constituency to see what rural development can be promoted there. Will the Minister ensure that any forestry related developments that might be identified as future projects will get ministerial support?
My purpose in raising this subject is to alleviate the consequences of what I perceive as the potential rural depopulation, which, if we are not careful, will flow from inevitable changes in the agricultural sector in the coming years in south-east Scotland and other parts of rural Scotland. Forestry is a unique and commercially viable alternative source of stable employment, and with consistent husbandry and proper control it is infinitely renewable. That makes it different from just about every other industry, whether coal, oil or any other of the important industries in Scotland. Forestry is infinitely renewable if looked after properly.
Forestry has an important part to play in a local context in south-east Scotland and in the broader national economic strategy for the United Kingdom. If properly developed, it offers tremendous potential for rural betterment and prosperity, but the Government have a vital part to play by drawing together the diverse strands, consulting all the interested parties and setting out the right framework to enable the industry to realise its potential to the full.

The Parliamentary Under-Secretary of State for Scotland (Mr. John MacKay): I listened with great interest to what the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) said about forestry in south-east Scotland, and in general. Some two years ago he raised a debate on the Adjournment of the House on the problems confronting forestry. It is significant that today's debate is taking place against a different background.
If forestry is to flourish, it has to be geared to the markets for its timber, and much of the wood processing industry now operates on a scale that transcends regional boundaries. There is a tendency to think of forestry as a rural and therefore local activity, but that is true only up to a point. The forests are there to produce timber, and to serve the needs of industry, and the scale and pattern of market demand mean that it is difficult, if not impossible, to look comprehensively at forestry in any part of the country in isolation. We have to take account of the situation at least on a Scottish, if not a Great Britain, basis. More particularly, in the south-east of Scotland, we have to look at the Great Britain picture.
Let us look, therefore, at forestry in this country. We need go back only some five years, which is a short period in forestry terms, to find an industry in some trouble. When we came to power in 1979, there was more doom and gloom about than optimism. New planting by the private sector, which is always a reflection of the confidence of the industry, was at a low ebb. The wood-processing industry was faced with the impact of a worldwide recession, and as a result many closures occurred with the loss of jobs and capacity for processing home wood supplies. The future of the whole industry was, to say the least, uncertain.
The Government then embarked on a major review of forestry policy, the outcome of which was announced to the House by my right hon. Friend the Secretary of State in December 1980. The policy was designed to help get forestry back on its feet and in a position to take full advantage of the increasing output of timber from the nation's forests. But equally important, it was a clear

message that the Government backed forestry. The hon. Gentleman mentioned our forestry product imports, which are a good reason for an increased forestry policy.

Mr. Home Robertson: Will the Minister give way?

Mr. MacKay: I should like to make progress, in view of the time.
Contrast the position today with that of five years ago. Confidence has returned in full measure and forestry in Britain is now going from strength to strength. The Government's forestry policy has played its part in that renaissance, aided by our determination that industry in general should find its competitive edge once more. The transformation has been far from easy. Tough decisions have had to be taken, but they have paid off, and the industry is now geared up for the future.
Regarding new planting, I am pleased to say that the private sector has responded well to the challenge that we set it. A new forestry grant scheme was introduced in 1981. While in Great Britain the amount of new planting carried out by the private sector in the year to March 1980 was some 8,300 hectares, the figure had nearly doubled to more than 16,000 hectares in the year to March 1985. Scotland had by far the major slice of that, with more than 14,000 hectares of private planting, in marked contrast to the 6,900 hectares in 1980. That is all apart from a continuing planting programme by the Forestry Commission of 5,000 hectares throughout the country, again with the bulk of the planting, some 4,500 hectares, in Scotland.
Now we have a further impetus to new planting by the private sector through the launch in October this year of the broadleaved woodland grant scheme. This is part of the Government's policy on broadleaves announced by the Secretary of State on 24 July 1985. Although these are early days, I gather from the Forestry Commission that the scheme has attracted a massive amount of interest, and it seems that we shall see many more broadleaves planted. The new scheme has particular relevance and interest to farmers, in that well managed woods can not only be productive in timber terms, but can bring shelter and sporting benefits, as well as being of value in conservation and amenity terms.
The way in which the wood-processing industry has turned round in the past five years is remarkable. This year alone has seen the coming on stream of two major plants—United Paper Mills newsprint mill at Shotton in north Wales, and Highland Forest Products structural composition board plant near Inverness. Those two developments alone will require a total of 600,000 cubic metres of home grown timber a year, and will make up for the capacity lost as a result of the three pulp mill closures in the recession in 1980. The other major development in the pulp and paper sector, dependent on home wood supplies, was the major expansion by Thames Board Mills at Workington to increase its capacity for the production of cartonboard. Other developments have taken place in the particleboard industry—with future expansion intended at plants at Hexham and Chirk—and in sawmilling, where significant expansion has taken place in Scotland with investment and modern technology to meet the growing volumes of material coming on to the market. Those developments have not only provided new jobs in the processing industry but have been instrumental in establishing and maintaining jobs in the timber and


haulage industries. They are proof of the vigour and enterprise of the domestic forestry products industry and tangible evidence of the Government's efforts during the past five years to stimulate and encourage new industrial investment.
How does all this good news relate to south-east Scotland? Clearly, what is good for forestry in general is good for forestry there. We now have the crucial element of secure markets for the timber from the area, which is the best possible guarantee of job security for many of those who work in the industry.
The hon. Gentleman discussed the jobs in downstream activities in south-east Scotland. It must be appreciated that in the pulp and paper sector, as well as in the wood-based panel sector, large-scale wood-processing developments are essential to provide a sound basis for the industry in Great Britain. Investments must be on the large scale necessary to compete effectively with imports. One of the crucial factors attracting industry to Great Britain is our ability to guarantee an adequate and continuous supply of timber now and in the foreseeable future. Here the Forestry Commission has a key role to play, with the result that over large parts of the country the planned output of timber from commission forests over the next few years is substantially committed to secure markets.
Bearing in mind the enormous quantities involved, timber supplies to major developments in this country have to come from far and wide. They are of direct benefit to a great many rural areas in providing a stable and continuing demand and thus a guarantee of continuing employment in harvesting and haulage. When it comes to location, a great many factors have to be taken into account, and the final decision is a commercial one which only the investor can make.
This does not mean to say that there is no scope for expanding or establishing smaller locally based wood-processing plants and mills. Far from it. Indeed, there are many examples of such developments in sawmilling in Scotland. But this is not so much a matter of broad strategy as of local initiative. I particularly welcome the fact that the Borders regional council, backed by the SDA, is proposing to carry out a feasibility study which will cover the opportunities for local timber processing likely to present themselves in coming years. Like the hon. Gentleman, we welcome that. It rests with local people to seize on any opportunities identified in that study.
South-east Scotland contains about 70,000 hectares of managed forests. At present the Forestry Commission is producing just under 100,000 cubic metres of timber from local forests, and private forests are producing about half this amount. Supplies of small roundwood go to various outlets. Some are sent to the Shotton newsprint mill, some to Thames board mill at Workington, some to Caberboard at Stirling, and to the particleboard mill at Hexham recently acquired by Egger Ltd.
Sawlogs form just under half the total output and are supplied to a number of sawmills some of which are located within south-east Scotland. The area—in common with the rest of Scotland—is expected to have a significant growth in wood production over the next 10 years—of the order of 80 per cent.—which is bound to have a beneficial effect on employment. It is not possible to say how much of the extra production is likely to be processed locally, but at least the raw material will be there, and as I have already said there is scope for local initiative.
As for future planting, we are looking to the private sector to continue to expand. In south-east Scotland over the past two and a half years, some 2,500 hectares of new planting have been carried out under the Forestry Commission's forestry grant scheme. In the same period, 9,500 hectares have been cleared for planting, and this shows that interest continues at a high level and augurs well for a steady expansion of the forest estate. This coupled with an increasing restocking programme in both commission and private forests, should help to secure employment.
The hon. Member for East Lothian (Mr. Home Robertson) and the hon. Member for Roxburgh and Berwickshire referred to planting without grants and to the two cases that had occurred in south-east Scotland. Both hon. Members have raised this matter before, and I have responded in the past, not only to them but also to other hon. Members. At the risk of repeating what I have already said, these two cases are the first significant ones of their type since the introduction of the consultation process in 1974.
The Government do not wish to overreact, and I make no secret of the fact that on the basis of these two cases we do not contemplate any action, although we have made our displeasure well known in the private forestry industry. If other cases were to materialise, we should reassess the position as a matter of priority and take the appropriate action. I hope that answers the point.
The hon. Member for Roxburgh and Berwickshire made the point that planting and the expansion of forestry depend upon land becoming available for planting. I am conscious of the anxiety being expressed that not enough land is being cleared for forestry. That is a complex subject, but the Department of Agriculture and Fisheries for Scotland and the Forestry Commission are together looking at the criteria for the clearance of agricultual land for forestry to see whether changes are now called for. I shall not attempt to anticipate the outcome of those discussions, but I can assure the House that we are very much aware of the need to strike the right balance between those two important rural industries.
The hon. Gentleman drew my attention to a question from my hon. Friend the Member for Stirling (Mr. Forsyth) that I answered. I remember the figures well. I spent a wet day in the Glenorchy forest in my constituency in September discussing matters with the Forestry Commission. I discussed employment and environmental matters with the two members of staff who accompanied me. They were convinced and were able to give me figures that showed that forestry employed more people than hill sheep farming, although I suspect that they were not prepared to go to the extent that I did in my answer to my hon. Friend—showing seven jobs in forestry to one in hill sheep farming.
One of the problems that we discussed was that in forestry there are many jobs in the haulage industry—as I know, because my constituency is one of the most heavily afforested in the United Kingdom—which are difficult to quantify because the firms conduct other haulage business at the same time.
The hon. Gentleman referred to the sale of woodlands in his area. He reminded the House that he had expressed anxiety about that. I am glad that some of his fears have been proved to be groundless. I know that there have been some redundancies in the Lammermuir forest where the commission is steadily selling its interest. Those job losses


are obviously to be regretted. That said, it is to the advantage of the commission and the public purse that it can dispose of the woodlands that it finds difficult and expensive to manage. The woodland at Lammermuir certainly falls into that category.
Again using Argyle and Bute as a base, I view forests as large operations. A forest seems to me to consist of many trees and at least a few hundred hectares. The Lammermuir forest consists of 2,600 hectares in 74 scattered blocks. They are obviously more awkward and difficult to look after than 2,600 hectares in my constituency, all planted fairly closely.
In forestry we have an important industry. As the hon. Gentleman hinted, the commission has made an important review of the way that it operates and has amalgamated the two-tier system of local management at district and forest

level to form one level of management—the forest district. That has had an impact on local management posts, and some local offices have been closed. That is, of course, to be regretted, but if the commission is to compete and provide the wood processors with competitively priced timber, it is important that it should match its local management structure with present and future needs and with the need to produce the timber as efficiently and effectively as possible. The commission has done that. I believe that, given the agricultural surpluses, forestry provides us with a means of using the land and creating jobs. I hope that it will marry the needs of agriculture with those of the environment. All those factors are important and make up the patchwork quilt that represents the rural scene.

Question put and agreed to.

Adjourned accordingly at fourteen minutes past Twelve o'clock.